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Highlights

Net Profit
` 14,550 crore
An increase of 18.3% compared to the previous year.

Balance Sheet Size


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훴 ࿿࿿࿿࿿࿿࿿࿿࿿࿿—ञ皚࿿࿿࿿࿿࿿࿿࿿࿿࿿˜꺔䚕
“ࠢ࿿䘑࿿࿿࿿࿿࿿࿿࿿࿿࿿”㢖庖࿿࿿࿿࿿࿿࿿࿿࿿࿿࿿࿿睛࿿࿿࿿࿿࿿࿿࿿࿿࿿–훴
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®ꄶ旒࿿࿿࿿࿿࿿࿿࿿࿿࿿¯Ἢ溻࿿࿿࿿࿿࿿࿿࿿࿿࿿°⧊澿࿿࿿࿿࿿࿿࿿࿿࿿࿿±蠈唋࿿࿿࿿࿿࿿࿿࿿࿿࿿²㫎㓌࿿࿿࿿࿿࿿࿿࿿࿿࿿³扠乕
࿿࿿࿿࿿࿿࿿࿿࿿࿿´⿈䱧࿿࿿࿿࿿࿿࿿࿿࿿࿿µᇂ劣࿿࿿࿿࿿࿿࿿࿿࿿࿿¶殀䓯࿿࿿࿿࿿࿿࿿࿿࿿࿿· 863,840 crore
An increase of 16.6% compared to the previous year.

Total Deposits
0 643,640 crore
An increase of 17.8% compared to the previous year.

Total Advances
` 554,568 crore
An increase of 19.4% compared to the previous year.

Capital Adequacy Ratio


14.6%

Tier I Capital Ratio


12.8%

Gross Non-performing Assets


1.05% of Gross Advances
Network
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Engineering Change:
Banking on Bharat
Banking in rural areas has not been able to keep up with the bank is constantly striving to improve the platform to make it
growth in urban banking. But we have strived to create a more user-friendly considering the requirements of the rural
responsive, sustainable, and all-encompassing ecosystem, population.
which is key to India’s economic upliftment.
The bank, through various collaborative efforts, provides free
More than half of the bank’s branches are in semi-urban and SMS advice on weather, cropping and harvesting.
rural areas, demonstrating our commitment to promote rural
banking. Further, HDFC Bank digitized payments at over 1,200 milk
cooperatives across the nation. The move is part of the bank's
Rural Banking Group Milk to Money (M2M) program, benefitting 3.2 lakh dairy
Farmers are the backbone of our country’s economy, integral farmers in 16 states. M2M aims to bring dairy farmers into the
to its eventual growth and development. The bank’s principal organized banking system by digitizing the supply chain, with
objective is to empower rural India. specific and customized products targeted at satisfying their
banking and financial needs.
The bank has penetrated several remote geographies through
its flagship product, the Kisan Gold Card. It has covered M2M ATMs at large collection centers are equipped with cash
approximately 60,000 villages so far. The bank has designed a dispensers. Smaller collection points have business
range of crop and geography-specific products based on correspondents who operate micro ATMs allowing dairy
respective harvest cycles and the local needs of farmers farmers to withdraw cash from their accounts.
based in diverse agro-climatic zones across India. Exclusive
products ensure credit for activities allied to agriculture such as The program has enunciated greater transparency in the milk
dairy, pisciculture and sericulture. collection process impacting society at large by eradicating
cash management worries. A credit history is also generated
The bank has established a footprint in the hinterlands which helps farmers take out loans or avail other banking
leveraging its extensive know-how of rural customers and products. Further, the society functioning as a business
delivering the right products at affordable prices with rapid correspondent is able to distribute the bank’s products to all
turnaround times. households in the catchment area.

Technology and deep branch penetration have enabled the HDFC Bank’s Sustainable Livelihood Initiative (SLI) aims to
bank to deliver agricultural loans within three to four working include and uplift households at the bottom of the pyramid. The
days in certain geographies. Additionally, an eligible farmer bank has adopted a holistic approach that encompasses
can avail of an enhancement to a loan in a few seconds using occupational training, financial literacy, and credit counselling
ATMs or mobile phones. to empower people. Self-Help Groups and Joint-Liability
Groups have been instrumental in helping the bank accelerate
The bank also offers many other credit products such as two- its direct linkage program. The bank aims to reach out to 1
wheeler loans, car loans, and mortgage loans to bolster crore households with the initiative, for which it has hired
financial inclusion in rural areas. Specific needs are addressed thousands of employees.
with individualised offerings to manage multiple consumption
requirements. The bank has shifted from a product-centric The SLI program has been hugely successful, which has been
approach to a customer-centric one to expand its presence in noted by important institutions. The National Bank for
rural territories in a cost-effective manner. Agriculture and Rural Development has commended the
bank’s SLI program in its publication, The Status of
With a sound knowledge of the rural ecosystem, the bank Microfinance in India 2014-15. It recommended that HDFC
endeavors to augment penetration of the liability base in rural Bank’s SLI model be studied for adoption by other banks.
geographies. The bank has a symbiotic relationship with rural
customers and is making efforts to empower them by providing The bank has also been at the centre of crafting innovations in
technical support, besides offering financial products. retail banking. It offers recharge facilities through missed calls.
The move is targeted at semi-urban and rural customers. The
Kisan Dhan Vikas Kendras, launched across the country as a idea has been extended to include fixed deposits and fund
part of these efforts, can help a farmer with free Soil Health transfers.
Cards, Mandi prices, financial literacy, digital literacy,
information on various government initiatives, etc. A larger proportion of the bank’s business is expected to
accrue from rural banking in the years to come. With rural
Farmers can avail the benefits of these services online on the household incomes on the rise, the bank is well poised to
bank’s website at Kisan Dhan Vikas e-Kendras. This service is participate in the expanding demand in financial services and
available in multiple vernacular languages. The products.
Pradhan Mantri
Jan Dhan Yojana
At HDFC Bank, we believe in ensuring financial transactions HDFC Bank feels that financial literacy is at the core of efficient
are more personal, inclusive, and far-reaching. This mandate is fiscal inclusion, smart digital transactions, and reliable
in alignment with the Pradhan Mantri Jan Dhan Yojana customer protection. The bank’s model for the same brings
(PMJDY) launched on August 28, 2014, by the Honorable together financial inclusion and financial literacy – as two
Prime Minister of India and Jan Dhan-Aadhaar-Mobile (JAM), concurrent pillars operating seamlessly towards a composite
underlining a steadfast commitment to welfare and upliftment whole. Financial literacy helps customers make enlightened
for all. fiscal choices, imbibing the benefits of a strong linkage with the
banking system and its various digital pipelines for
These vibrant and unique notions are actively propagated by
transactions. Educational material for financial literacy is
the Indian government in its quest to empower and transform
printed in 13 regional languages, simplifying the dissemination
the nation’s social fabric for the better.
of information among attendees.
Aadhaar pivots the bank’s financial inclusion strategy where
Till date, HDFC Bank has carried out 1.29 lakh financial
every bank mitra (business correspondent) is equipped with
literacy camps through its various educational centers spread
Aadhaar and e-KYC enabled micro-ATMs. The micro-ATMs
across schools, gram panchayats, self-help groups, and the
allow customers to effectively action basic banking activities
like. A total of 11.68 lakh people have benefited from these
using the “power of the thumb”. Each micro-ATM is fully
programs.
compliant with contemporary regulatory standards and ensures
that customers can perform Rupay card-based transactions. As The road to a sustainable and financially enriched future for
of March 31, 2017, HDFC Bank has opened 17.33 lakh the nation has several milestones. At HDFC Bank, we believe
PMJDY accounts (since inception). these are some of our proudest achievements - and we remain
committed toward the creation of a secure and thriving
The bank firmly believes in the importance of Aadhaar-linked
tomorrow for all of India’s populace.
accounts, particularly in the scenario of direct benefit transfers
(DBT), and has pledged to educate and inform its customers
on the same. Our plan enables all its digital channels to
become Aadhaar-seeding vehicles. Customers can use a
variety of options — NetBanking, PhoneBanking,
MobileBanking, SMS, and ATM – to seed Aadhaar.

The bank has consistently been a part of several social


security schemes launched by the government, and is now
recognized as a leader among the private sector banks
involved in Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan
Mantri Suraksha Bima Yojana and Atal Pension Yojana.

For FY 2016-17, HDFC Bank disbursed a total amount of Rs. 5,522


crore to 14.78 lakh customers - thereby achieving 104% of the
target fixed for the bank. Further, Rs. 147 crore was also disbursed
by the bank under the Stand-Up India Program-facilitating loans
between Rs. 10 lakh and Rs. 1 crore for Scheduled Caste (SC) or
Scheduled Tribe (ST) women borrowers involved in the
development of greenfield enterprises.
Financial Highlights

2007-2008 2008-2009 2009-2010


Interest income 10,530.43 16,584.01 16,467.92

Interest expense 4,887.12 8,911.10 7,786.30

Net interest income 5,643.31 7,672.91 8,681.62

Other income 2,495.94 3,700.65 4,573.63

Net revenues 8,139.25 11,373.56 13,255.25

Operating costs 4,311.03 5,950.54 6,475.71

Operating result 3,828.22 5,423.02 6,779.54

Provisions and contingencies 1,547.59 2,123.78 2,490.40

Loan loss provisions 1,278.84 1,970.35 2,288.74

Others 268.75 153.43 201.66

Profit before tax 2,280.63 3,299.24 4,289.14

Provision for taxation 690.45 1,054.31 1,340.44

Profit after tax 1,590.18 2,244.93 2,948.70

Funds :

Deposits 100,768.60 142,811.58 167,404.44

Subordinated debt 3,249.10 8,738.58 6,353.10

Stockholders’ equity 11,497.23 14,646.33 21,519.58

Working funds**** 138,027.78 183,270.77 222,458.57

Loans 63,426.90 98,883.05 125,830.59

Investments**** 53,607.57 53,309.31 51,013.32

Key Ratios :

Earnings per share (`) * 9.24 10.57 13.51

Return on average networth 16.05% 16.12% 16.80%

Tier 1 capital ratio 10.30% 10.58% 13.26%

Total capital ratio 13.60% 15.69% 17.44%

Dividend per share (`) * 1.70 2.00 2.40

Dividend payout ratio 22.17% 22.17% 21.72%

Book value per share as at March 31 (`) * 64.88 68.86 94.02

Market price per share as at March 31 (`) ** 266.25 194.68 386.70

Price to earnings ratio 28.80 18.42 28.62

0 1 Crore = ` 10 Million
23 Figures for the years prior to 2011-2012 have been adjusted to reflect the effect of split of equity shares from nominal value of ` 10 each
into five equity shares of nominal value of ` 2 each.
5888 Source : NSE (prices for years prior to 2011-2012 have been divided by five to reflect the sub-division of shares)
5888 Proposed
5888 Figures for the previous years have been adjusted to reflect the effect of reclassification as mentioned in Schedule 18, Note no.1
forming part of ‘Notes to Accounts’.

HDFC Bank Limited Annual Report 2016-17 12


(` crore)
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

20,380.77 27,874.19 35,064.87 41,135.53 48,469.91 60,221.45 69,305.96


9,385.08 14,989.58 19,253.75 22,652.90 26,074.23 32,629.93 36,166.74

10,995.69 12,884.61 15,811.12 18,482.63 22,395.68 27,591.52 33,139.22

4,945.23 5,783.62 6,852.62 7,919.64 8,996.34 10,751.72 12,296.49

15,940.92 18,668.23 22,663.74 26,402.28 31,392.02 38,343.24 45,435.71

7,780.02 9,277.64 11,236.11 12,042.20 13,987.55 16,979.69 19,703.32

8,160.90 9,390.59 11,427.63 14,360.08 17,404.47 21,363.55 25,732.39

2,342.24 1,877.44 1,677.01 1,588.03 2,075.75 2,725.61 3,593.30

1,198.55 1,091.77 1,234.21 1,632.58 1,723.58 2,133.63 3,145.30

1,143.69 785.67 442.80 (44.56) 352.17 591.98 448.00

5,818.66 7,513.15 9,750.62 12,772.05 15,328.72 18,637.94 22,139.09

1,892.26 2,346.08 3,024.34 4,293.67 5,112.80 6,341.71 7,589.43

3,926.40 5,167.07 6,726.28 8,478.38 10,215.92 12,296.23 14,549.66

208,586.41 246,706.45 296,246.98 367,337.48 450,795.65 546,424.19 643,639.66

7,393.05 11,105.65 16,586.75 16,643.05 16,254.90 15,090.45 13,182.00

25,376.35 29,924.37 36,214.15 43,478.63 62,009.42 72,677.77 89,462.38

283,634.24 345,248.26 421,327.31 491,599.50 595,695.13 740,796.07 863,840.19

159,982.67 195,420.03 239,720.64 303,000.27 365,495.04 464,593.96 554,568.20

67,952.59 89,967.10 111,303.21 100,111.88 156,833.82 195,836.29 214,463.34

17.00 22.11 28.49 35.47 42.15 48.84 57.18

16.52% 18.37% 20.07% 20.88% 20.36% 17.97% 18.04%

12.23% 11.60% 11.08% 11.77% 13.66% 13.22% 12.79%

16.22% 16.52% 16.80% 16.07% 16.79% 15.53% 14.55%

3.30 4.30 5.50 6.85 8.00 9.50 11.00 ***

22.72% 22.70% 22.77% 22.68% 23.62% 23.51% 23.32%

109.09 127.52 152.20 181.23 247.39 287.47 349.12

469.17 519.85 625.35 748.80 1,022.70 1,071.15 1,442.55

27.59 23.51 21.95 21.11 24.26 21.93 25.23

HDFC Bank Limited Annual Report 2016-17 13


BOARD OF DIRECTORS STATUTORY AUDITORS
Mrs. Shyamala Gopinath, Chairperson
Mr. A. N. Roy Deloitte Haskins & Sells
Mr. Bobby Parikh Chartered Accountants
Mr. Partho Datta
Mr. Keki Mistry
Mrs. Renu Karnad
Mr. Malay Patel REGISTERED OFFICE
Mr. Umesh Chandra Sarangi
Mr. Srikanth Nadhamuni HDFC Bank House,
(Appointed as Additional Director w.e.f. September 20, 2016) Senapati Bapat Marg,
Mr. Aditya Puri, Managing Director Lower Parel,
Mr. Paresh Sukthankar, Deputy Managing Director Mumbai 400 013.
Mr. Kaizad Bharucha, Executive Director Tel: + 91 22 66521000
Fax: + 91 22 24960737
KEY MANAGERIAL Website: www.hdfcbank.com
PERSONS
Mr. Aditya Puri, Managing Director
CORPORATE IDENTIFICATION NO
Mr. Paresh Sukthankar, Deputy Managing Director
Mr. Kaizad Bharucha, Executive Director
Mr. Sashidhar Jagdishan, Chief Financial Officer CIN - L65920MH1994PLC080618
Mr. Sanjay Dongre, Executive Vice President (Legal) &
Company Secretary

SENIOR MANAGEMENT TEAM REGISTRARS & TRANSFER AGENTS


Mr. Abhay Aima
Mr. Ashish Parthasarthy Datamatics Financial Services Ltd
Mrs. Ashima Bhat Plot No. B 5,
Mr. Ashok Khanna Part B Crosslane,
Mr. Arvind Kapil MIDC, Marol, Andheri (East),
Mr. Aseem Dhru Mumbai 400 093.
Mr. Bhavesh Zaveri Tel: + 91 22 66712213-14
Mr. Chakrapani Venkatachari Fax: + 91 22 66712011
Mr. Dhiraj Relli (on deputation to HDFC Securities Limited, E-mail: hdinvestors@dfssl.com
the Bank’s subsidiary)
Mr. Jimmy M Tata
Mr. K Balasubramanian
Mr. Munish Mittal
Mr. Navin Puri
Mr. Neil Francisco
Mr. Nitin Chugh
Mr. Nitin Rao
Mr. Nirav Shah
Mr. Parag Rao
Mr. Philip Mathew
Mr. Rajender Sehgal
Mr. Rakesh K. Singh
Mr. Rajesh Kumar R
Mr. Ravi Narayanan

HDFC Bank Limited Annual Report 2016-17 14


23rd ANNUAL GENERAL MEETING

Date : July 24, 2017


Day : Monday
Time : 2.30 p.m.
Place : Birla Matushri Sabhagar,
19, New Marine Lines,
Mumbai 400 020
Record date for determining

eligibility of dividend :June 30, 2017 (both physical and electronic)

Contents

Directors’ Report 16 - 64
Independent Auditor's Report 65 - 67

Financial Statements 68 - 143

Independent Auditor's Report for Consolidated Financial Statements 144 - 147

Consolidated Financial Statements 148 - 196

Basel III - Pillar 3 Disclosures 197

Secretarial Auditor's Certificate on Corporate Governance 198

Corporate Governance 199 - 215

Shareholder Information 216

HDFC Bank Limited Annual Report 2016-17 15


Directors' Report

To the Members,
Introduction:
Your Directors take great pleasure in presenting the 23rd Annual Report on the business and operations of your Bank, together
with the audited accounts for the year ended March 31, 2017.
The year under review has been extremely satisfying with your Bank witnessing an increase in asset size, revenues and
profitability. What is more, it was able to manage the bad loans much better than the industry. The metric that best captures
performance is the domestic loan growth which stood at about 23.7 per cent against the overall banking system loan growth of
around 5 per cent. The other key performance indicators are Balance Sheet size (up 16.6 per cent), Total Deposits (up 17.8 per
cent), Net Profit (up 18.3 per cent) and Net Interest Income (up 20.1 per cent). Cost to Income Ratio improved to 43.4 per cent.
This assumes even more significance as it came in the face of demonetisation which led to growth pangs in the third quarter.
The performance is a reflection of the following:
5888 Leveraging digitization to improve customer experience, productivity and Cost to Income Ratio
5889 Consolidation of its lead over peers as India’s top Digital Bank in metro, urban, semi urban and rural markets
5890 Establishing itself as India’s leading rural focused bank with unmatched reach, product range and innovation
5891 Unique use of artificial intelligence and data analytics to sharpen product offering
It is also an outcome of a strong brand built on the twin engines of customer and community centricity. As you are aware, your
Bank has been ‘Creating Sustainable Communities’ through its social initiatives which help people break out of the vicious circle of
poverty and enable them to lead a better life. In pursuance of the Board mandate to make 1 crore families economically self-
reliant, we are happy to report that 68 lakh families at the bottom of the pyramid have already been covered. We are also proud to
state that during the year, your Bank has crossed the mandatory 2 per cent CSR spend.
Last but not the least, words cannot be enough to thank our employees who made all this possible. Especially during
demonetisation when they were faced with chaos and crises by the day and went beyond the call of duty.
Summary of Financial Performance
(` crore)
Particulars For the year ended / As on
March 31, 2017 March 31, 2016
Deposits and Other Borrowings 7,17,668.5 6,31,393.2
Advances 5,54,568.2 4,64,594
Total Income 81,602.5 70,973.2
Profit Before Depreciation and Tax 22,972.2 19,343.8
Profit After Tax 14,549.6 12,296.2
Profit Brought Forward 23,527.7 18,627.8
Total Profit Available for Appropriation 38,077.3 30,924
Appropriations
Transfer to Statutory Reserve 3,637.4 3,074.1
Transfer to General Reserve 1,455 1,229.6
Transfer to Capital Reserve 313.4 222.2
Transfer to / (from) Investment Reserve 4.3 (8.5)
Proposed Dividend* - 2,401.8
Tax (including cess) on Dividend* - 488.9
Dividend (including tax / cess thereon) pertaining to previous year paid during the year, (1.7) (11.7)
net of dividend tax credits
Balance carried over to Balance Sheet 32,668.9 23,527.6
*The Board of Directors, at the meeting held on April 21, 2017 has proposed a dividend of ` 11.00 per equity share aggregating
5888 3,392.7 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General
Meeting. In terms of revised Accounting Standard (AS) 4-Contingencies and Events Occurring after the Balance Sheet date as notified by

HDFC Bank Limited Annual Report 2016-17 16


Directors' Report

the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank
has not appropriated proposed dividend from Statement of Profit and Loss for the year ended March 31, 2017. However, the effect
of the proposed dividend has been reckoned in determining capital funds in the computation of the Capital Adequacy Ratio as on
March 31, 2017.
The Bank’s Total Income rose to ` 81,602.5 crore for the year under review from ` 70,973.2 crore in the previous year. Its Net Profit
increased by 18.3 per cent to ` 14,549.7 crore from ` 12,296.2 crore.
Appropriations from Net Profit have been effected as per the table given above.
Dividend
Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining
capital in order to maintain a healthy Capital Adequacy Ratio. It has had a consistent track record of steady increase in dividend
distribution over its history with the Dividend Pay-Out Ratio ranging between 20 to 25 per cent. The dividend policy of your Bank is
available on the Bank’s website at the following link: http://www.hdfcbank.com/htdocs/common/pdf/corporate/Dividend-Distribution-
Policy.pdf Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are
pleased to recommend a dividend of ` 11 per equity share of ` 2 as against ` 9.50 in the previous year. As you are aware, this
dividend shall be subject to tax to be paid by the Bank.

Ratings
Instrument Rating Rating Agency Comments
Fixed Deposit CARE AAA (FD) CARE Ratings Instruments with this rating are considered to have very strong
Programme degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
IND Taaa India Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
Certificate of Deposits CARE A1+ CARE Ratings Instruments with this rating are considered to have very strong
Programme degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
IND A1+ India Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
Long Term Unsecured, CARE AAA CARE Ratings Instruments with this rating are considered to have very strong
Subordinated (Lower degree of safety regarding timely servicing of financial obligations.
Tier 2) Bonds Such instruments carry lowest credit risk.
IND AAA India Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
Tier I Perpetual Bonds CARE AAA CARE Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
CRISIL AAA CRISIL Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
Upper Tier 2 Bonds CARE AAA CARE Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
CRISIL AAA CRISIL Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
HDFC Bank Limited Annual Report 2016-17 17
Directors' Report

Infrastructure Bonds CARE AAA CARE Ratings Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
CRISIL AAA CRISIL Instruments with this rating are considered to have very strong
degree of safety regarding timely servicing of financial obligations.
Such instruments carry lowest credit risk.
Tier I Bonds (Under CARE AA+ CARE Ratings Instruments with this rating are considered to have high degree
Basel III) of safety regarding timely servicing of financial obligations. Such
instruments carry very low credit risk.
CRISIL AA+ CRISIL Instruments with this rating are considered to have high degree
of safety regarding timely servicing of financial obligations. Such
instruments carry very low credit risk.
IND AA+ India Ratings Instruments with this rating are considered to have high degree
of safety regarding timely servicing of financial obligations. Such
instruments carry very low credit risk.

Issuance of Equity Shares In the year under review, HDBFSL’s Net Interest Income grew
by 41 per cent to ` 2,037.2 crore from ` 1,444.5 crore in the
During the year under review, 3,43,59,200 equity shares were
previous year. Net Profit rose 28 per cent to ` 684.2 crore from
allotted to the employees of your Bank in respect of the equity
stock options exercised under the Employee Stock Option 5888 534.4 crore.
Schemes. As on March 31, 2017, the issued, paid up and
HDBFSL is rated AAA for its long-term debt and A1+ for its
authorised capital of your Bank stood at ` 512,50,91,434
comprising 256,25,45,717 equity shares of ` 2 each. short-term debt facilities by CARE & CRISIL respectively
indicating the highest degree of safety regarding timely
Employee Stock Options servicing of financial obligations.
The information pertaining to Employee Stock Options is given Under the scheme of amalgamation approved by the Bombay
in ANNEXURE 1 to this report.
and Gujarat High Courts, two associate companies, Atlas
Capital Adequacy Ratio Documentary Facilitators Company Private Limited (ADFC) and
HBL Global Private Limited (HBL) have been amalgamated with
Your Bank’s total Capital Adequacy Ratio (CAR) calculated in line HDBFSL with effect from December 1, 2016. The appointed
with Basel III capital regulations stood at 14.6 per cent as on March
date of the merger was April 1, 2014. The scheme has
31, 2017, well above the regulatory minimum of 10.25 per cent
including Capital Conservation Buffer of 1.25 per cent. Of this, Tier accordingly been given effect to in these financial statements.
I CAR was 12.8 per cent. The effect of the proposed dividend has HBL provided marketing and promotion services while ADFC
been taken into account in computing these ratios. was in the BPO business.

Subsidiary Companies In the year under review, HDBFSL raised ` 1,099.4 crore
through a rights issue. This resulted in a higher capital base
Your Bank has two subsidiaries, HDB Financial Services Limited
(HDBFSL) and HDFC Securities Limited (HSL). The detailed
and Capital Adequacy Ratio (CAR) of 20.8 per cent, well
financial performance of the companies is given below. beyond the mandatory requirement of 15 per cent. The
proceeds of this issue will be utilised for capital expenditure,
HDB Financial Services Limited working capital and business growth. As on March 31, 2017,
HDBFSL is a leading Non-Banking Financial Company that caters your Bank held 96.2 per cent stake in the company.
to segments not covered by the Bank through a network of 1,151
HDFC Securities Limited
branches in 22 states and 3 Union Territories. Using both physical
and digital channels, the company offers loan and asset finance
HDFC Securities Limited (HSL) is among India’s largest retail
products to individuals, emerging businesses, and micro
enterprises across manufacturing, trading and services sectors. broking firms offering its 18 lakh customers a large bouquet of
Additionally, the company provides Business Process Outsourcing services. The company had the second highest number of
(BPO) solutions to HDFC Bank. active (transacting) customers among all broking houses.

HDFC Bank Limited Annual Report 2016-17 18


Directors' Report

In the year under review, the capital markets surged on the back of of the year under review had an impact on private
a good monsoon, higher FII inflows, improved corporate consumption, there has been a speedy recovery in consumer
performance and the passing of the Goods and Services Tax Bill. demand since then.
This is reflected in the company’s performance.
Going forward, weakness in private investment cycle and asset
HSL’s Total Income grew by 37.7 per cent to ` 553.2 crore from quality strain in the banking sector could prevent a full-fledged
5888 401.6 crore in the previous year. Net Profit grew by recovery though some improvement in the growth rate is quite
61.9 per cent to ` 215.9 crore from ` 133.3 crore. likely. Risks on the external front continue to loom on account
of policy uncertainty in the US and a slew of impending
Digital channels remain a core focus with more than 20 per
elections in Europe.
cent of customers transacting through the mobile app and
overall 68 per cent of customers being serviced digitally. In line The growth inflation mix should continue to remain broadly
with its increased thrust on digitisation, HSL added 11 branches unchanged in 2017-18. Going by the Union Budget, the focus of
in the year under review as against 12 in the previous year. As fiscal policy in the coming year will be the revival of rural economy
on March 31, 2017, it had 273 branches. and sustained increase in capital expenditure. Besides, higher
During the year under review, HSL won three prestigious PFRDA outlay on various social sector programmes and implementation of
Awards for National Pension Scheme (NPS), viz. Best Point of 7th Central Pay Commission Awards should boost consumer
Presence (POP) All Citizen, Best POP NPS Corporate and Best spending. Going forward, headline GDP growth is likely to increase
POP NPS Private Sector. It was adjudged runner up in the Best e- to 7.5 per cent in 2017-18 from 7.1 per cent in 2016-17.
Brokerage category at the Outlook Money Awards 2016.
Mission, Business Strategy and Approach to Business
As on March 31, 2017, your Bank held 97.9 per cent stake in
HSL. Your Bank’s mission is to be a ‘World Class Indian Bank’,
benchmarking itself against international standards and best
The annual reports of HDBFSL and HSL are available on the practices in terms of product offerings, technology, service
website of the Bank (www.hdfcbank.com). Shareholders who levels, risk management, audit and compliance. The objective
wish to have a copy of the annual accounts and detailed is to continue building sound customer franchises across
information may write to the Bank. These documents shall also distinct businesses so as to be a preferred provider of banking
be available for inspection by shareholders at the registered services for its target retail and wholesale customer segments,
offices of the Bank and its two subsidiaries. and to achieve a healthy growth in profitability consistent with
the Bank’s risk appetite.
MANAGEMENT DISCUSSION AND ANALYSIS

Macroeconomic and Industry Developments Your Bank’s business philosophy has been based on 5 core
values: Customer Focus, Operational Excellence, Product
India’s economy recorded a growth rate of 7.1 per cent in terms Leadership, People and Sustainability. Based on these
of real Gross Domestic Product (GDP) in 2016-17. While cornerstones, it is your Bank’s aim to build an Indian Bank that
agriculture growth rose to 4.4 per cent in 2016-17 from 0.8 per meets the financial needs of, and provides services of a high
cent in 2015-16, services sector growth declined to 7.9 per cent quality to its customers across the country. Your Bank is committed
from 9.8 per cent during the same period. Inflation moderated, to do this while ensuring the highest levels of ethical standards,
with the average level of Consumer Price Inflation declining to professional integrity, corporate governance and regulatory
an estimated level of 4.6 per cent in 2016-17 from 4.9 per cent compliance. This is articulated through a well-documented Code of
in 2015-16. Foreign Direct Investment inflows (FDI) increased Conduct that every employee, including senior management, has
by 12 per cent in the April–December period of 2016 over the to affirm annually that he/she will abide by.
corresponding period of the previous year.
Consistent with the mission and approach, your Bank’s
A range of supply side measures, including prudent food stock
business strategy emphasises the following:
management, appropriate monetary policy action and subdued
global commodity prices led to the decline in inflation. Meanwhile, 23 )NCREASE MARKET SHAREA IN )NDIA
a close to normal monsoon, liberalisation of FDI rules and higher SS EXPANDING BANKINGK ANDN
government capital expenditure supported domestic economic financial services industry
growth in 2016-17. While the cash-squeeze in the third quarter
5888 )NCREASE GEOGRAPHICALIREACH

HDFC Bank Limited Annual Report 2016-17


19
Directors' Report

23 #ROSS As on March 31, 2017, your Bank’s Total Balance Sheet stood
SELL BROADOlNANCIAL PRODUCTDPORTFOLIO ACROSS at ` 8,63,840 crore, an increase of 16.6 per cent over
CUSTOMER base 23 7,40,796 crore on March 31, 2016. Total Deposits
increased by 17.8 per cent to ` 6,43,640 crore from ` 5,46,424
5888 #ONTINUE INVESTMENTS IN TECHNOLOGY TO crore. This was after considering maturities of about US $ 3 billion
SUPPORTT DIGITALI strategy of Foreign Currency Non-Resident (FCNR) deposits raised (and
0 -AINTAIN STRONG ASSETSQUALITYLTHROUGHODISCIPLINEDPCREDIT
swapped into rupees with RBI at a concessional rate) during the
year ended March 31, 2014. Current Account and Savings Account
RISK management
(CASA) Deposit growth witnessed a spurt during the year under
0 -AINTAIN A LOWWCOST OFSFUNDS review largely attributable to the demonetisation exercise.

Financial Performance Savings Account Deposits grew by 30.9 per cent to


5888 1,93,579 crore while Current Account Deposits grew by
The financial performance of your Bank during the year ended 30.7 per cent to ` 1,15,574 crore. Time Deposits stood at ` 3,34,487
March 31, 2017 remained healthy with Total Net Revenues crore representing an increase of 7.9 per cent. CASA Deposits
(Net Interest Income plus Other Income) increasing by 18.5 per accounted for 48 per cent of the Total Deposits as against 43 per
cent to ` 45,435.7 crore from ` 38,343.2 crore in the previous cent earlier. Advances stood at ` 5,54,568 crore, an increase of
year. Revenue growth was driven by an increase in both Net 19.4 per cent. This was after considering repayments during the
Interest Income and Other Income. Net Interest Income grew year of about US $ 2 billion of overseas loans linked to FCNR
by 20.1 per cent due to acceleration in loan growth coupled deposits. The Bank’s domestic loan portfolio of ` 5,38,642 crore
with a core Net Interest Margin (NIM) of 4.3 per cent in the year grew by 23.7 per cent over March 31, 2016. The Bank had a share
ended March 31, 2017. of 5.9 per cent in Total Domestic Deposits and 6.8 per cent in Total
Domestic Advances. Its Credit Deposit (CD) Ratio stood at 86 per
Other Income grew 14.4 per cent to ` 12,296.5 crore. The largest cent on March 31, 2017.
component was fees and commissions, which increased by 13.6
per cent to ` 8,812 crore. Foreign exchange and derivatives Business Segments Update
revenue was ` 1,263.4 crore, gain on revaluation and sale of
investments was ` 1,139.4 crore and recoveries from written-off Retail Banking
accounts was ` 864.3 crore in the year under review.
Your Bank follows a multi-channel strategy to reach out to its
Operating (Non-Interest) Expenses increased to ` 19,703.3 customers bringing to them choice, convenience and a superior
crore from ` 16,979.7 crore. During the year under review, your experience. Innovation has been the springboard of growth in this
Bank opened 195 new branches and 260 ATMs. This, along segment. So has a strong focus on analytics and Customer
with strong growth in retail asset and card products resulted in Relationship Management (CRM) which has helped the Bank know
higher infrastructure and staffing expenses. Staff expenses the customer better and offer tailor-made solutions. This leads to
also increased on account of annual wage revisions. Despite deeper customer engagement in a cost effective manner.
the addition to the infrastructure, your Bank’s Cost to Income
The growth in your Bank’s retail banking business was robust
Ratio improved to 43.4 per cent.
during the year under review. Total Retail Deposits grew by
Total Provisions & Contingencies was ` 3,593.3 crore as 17.7 per cent to ` 5,06,843 crore on the back of a higher than
compared to ` 2,725.6 crore. Your Bank’s provisioning policies usual CASA which, thanks to demonetisation, grew at 32.9 per
remain more stringent than regulatory requirements. The cent.
Coverage Ratio based on specific provisions alone excluding
Auto Loans, Personal Loans and Credit Cards accounted for a
write-offs stood at around 69 per cent and including general
bulk of the retail business revenues. Your Bank is a leader in
and floating provisions around 130 per cent as on March 31,
the Auto Loans segment with a strong presence in commercial
2017. Your Bank made General Provisions of ` 392.2 crore
vehicle and two wheeler financing.
during the year.
The Bank’s Retail Advances grew by 18.9 per cent to `
In the year under review, your Bank’s Profit Before Tax grew by
2,95,161 crore.
18.8 per cent to ` 22,139.1 crore. After providing for Income Tax of
` 7,589.4 crore, the Net Profit increased by 18.3 per cent to During the year under review, your Bank added 195 branches
0 14,549.7 crore from ` 12,296.2 crore. Return on Average Net taking its physical distribution network to 4,715 branches in
Worth was 18 per cent while the Basic Earnings Per Share was 2,657 cities/towns. Number of ATMs increased to 12,260 from
1 57.2 up from ` 48.8.

HDFC Bank Limited Annual Report 2016-17 20


Directors' Report

12,000 during the same period. The Bank grew its customer growing by over 20 per cent to cross ` 1,25,000 crore in the
base to 4.05 crore from 3.77 crore with a continued focus on year under review. This growth was achieved, in an otherwise
semi-urban and rural markets that accounted for more than 52 subdued credit environment, through securing a higher share
per cent of its branches. of the customer wallet, addition of new clients, introduction of
differentiated product offerings in the market place and gaining
In Credit Cards, the Bank’s focus on existing customers continued, market share from competition. It pioneered in creating
who accounted for about 75 per cent of the new cards issued with products and services to match the changing market dynamics
the number of Point-of-Sale (PoS) terminals crossing 4.25 lakh. and customer behaviour.
What is more, the transactions on these witnessed a sharp spurt in
the third quarter due to demonetisation. Emerging Corporates Group, which focuses on the mid-
market segment, recorded a 34 per cent growth in asset size to
In addition to this, the Bank operates in the Home Loan business in cross ` 65,000 crore on March 31, 2017. The strength of this
conjunction with HDFC Limited. As per this arrangement, the business lies in its diversified portfolio in terms of both industry
former sells loans provided by the latter through its branches, while and geography. Its success was due to its ability to acquire a
the latter approves and disburses it. The Bank receives sourcing higher share of wallet from existing clients as well as securing
fee for these loans and has the option to purchase up to 70 per new ones on the strength of a strong product offering plus a
cent of the fully disbursed loans either through the issue of solution based approach.
mortgage backed Pass Through Certificates (PTCs) or by a direct
assignment of loans. The balance is retained by HDFC Limited. The Investment Banking business cemented its prominent
Your Bank originated, on an average, ` 1,500 crore of Home Loans position in Debt Capital Markets. A testimony to this is the
every month in the year under review. It also purchased loans Bloomberg rankings of INR Bond book runners where your
worth ` 13,146 crore under the ‘Loan Assignment’ route during the Bank was placed 2nd for two consecutive years.
year ended March 31, 2017.
In Government business, your Bank’s focus on tax collections
Your Bank also distributes Life Insurance, General Insurance continued to gather pace. In the year under review, the direct tax
and Mutual Fund products through its tie-ups with insurance collected by your Bank was about ` 2.16 lakh crore and indirect tax
companies and mutual fund houses. Third Party Distribution ` 1.19 lakh crore. Apart from the several state Governments for
Income contributed approximately 16 per cent of total fee which your Bank has been collecting taxes/duties, the Bank has
income for the year ended March 31, 2017, compared to 14 per also been authorised to collect GST. Your Bank continues to enjoy
cent in the previous year. its eminent position in both Cash Management Services (CMS)
and Cash Settlement Services for major stock and commodity
Wholesale Banking exchanges in the country.

Like in retail, the Wholesale Banking business logged a strong In line with the Bank’s drive towards digitisation, it has further
growth ending the year under review with a loan book of about ensured a larger conversion of cash payments into electronic
23 2,63,000 crore constituting 47 per cent of the Bank’s ones. The ‘Trade-on-Net’ offering which provides customers
total book. It grew 20.1 per cent in the year under review access to a host of services like Remittances, Letters of Credit
catering to institutional customers like large and emerging and Guarantees gained even greater acceptance.
corporates, and SMEs. Government business is another major
contributor. The breadth of offering includes Working Capital International Operations
and Term Loans as well as Trade, Cash Management, Foreign
Your Bank currently has branches at three locations outside India.
Exchange and Investment Banking services.
These are at Bahrain, Hong Kong and Dubai International Finance
Growth came primarily on the back of impeccable execution of your Centre (DIFC) in Dubai. The DIFC branch offers advisory services
Bank’s time-tested strategy of offering customers a wide range of to High Net Worth Individuals and Corporates. Your Bank also has
products and services, customisation and cross selling. Dedicated Representative Offices in Abu Dhabi, Dubai and Nairobi which are
Relationship Managers helped in the customisation and cross selling engaged in promotional and marketing activities of the Bank’s
process. Technology further aided to improve the customer experience. brand name among the Non-Resident Indians. As on March 31,
All this led to higher share of customer wallet. 2017, the combined balance sheet size of overseas branches was
around US $ 4 billion. Advances at these branches constituted
Corporate Banking, which focuses on large and well rated close to 4 per cent of the Bank’s gross advances as on March 31,
companies was the biggest contributor with its asset size 2017. The total income of the

HDFC Bank Limited Annual Report 2016-17 21


Directors' Report

overseas branches constituted over 1.2 per cent of the Bank’s Implementation of Indian Accounting Standards (IND-AS)
total income for the year.
The Ministry of Corporate Affairs, in its press release dated
Your Bank had mobilised US $ 3.4 billion in special FCNR (B) January 18, 2016, issued a roadmap for implementation of Indian
deposits from NRI clients under RBI swap window in 2013. As Accounting Standards (IND-AS) for scheduled commercial banks,
a major portion of these deposits were for a 3-year tenor, they insurers/insurance companies and non-banking financial
came up for redemption during September-November 2016. companies. This roadmap requires these institutions to prepare
US $ 3.02 billion of these flowed out and US $ 355.67 million IND-AS based financial statements for the accounting periods
was outstanding for the year ended March 31, 2017. beginning from April 1, 2018 onwards with comparatives for the
periods beginning April 1, 2017 and thereafter. The Reserve Bank
Treasury of India (RBI), vide its circular dated February 11, 2016 requires all
scheduled commercial banks to comply with the Indian Accounting
The Treasury Group is responsible for compliance with reserve
Standards (IND-AS) for financial statements for the periods stated
requirements and management of liquidity and interest rate risk
above. RBI does not permit banks to adopt IND-AS earlier than the
on the Bank’s balance sheet. On the foreign exchange and
timelines stated above. The said guidelines also state that RBI
derivatives front, revenues accrue from spreads on customer
shall issue necessary instructions/ guidance/clarifications on the
transactions based on trade flows and their demonstrated
relevant aspects for implementation of IND-AS as and when
hedging needs. Your Bank recorded revenues of ` 1,263.4
required.
crore from foreign exchange and derivative transactions in the
year under review. These revenues were distributed across Your Bank has formed a steering committee comprising
large and emerging corporates, business banking and retail members from cross-functional areas for the purpose of
customer segments for plain vanilla foreign exchange products implementation oversight. Under the guidance of the steering
and across primarily large and emerging corporate segments committee, the Bank has formed working groups, including
for derivatives. The Bank offers Indian Rupee and foreign external consultants, dedicated to specific functional areas. The
exchange derivative products to its customers, who use them objective of these working groups is to undertake a review of
to hedge their market risks. the diagnostic analysis of the differences between the current
accounting framework and IND-AS, review the accounting
Your Bank enters into foreign exchange and derivative deals with
policy options provided under IND-AS 101-First Time Adoption,
counterparties after it has set up appropriate counterparty credit
determine the methodologies for each accounting treatment,
limits based on its evaluation of the ability of the counterparty to
finalise process and system changes, review and update
meet its obligations in the event of crystallisation of the exposure.
policies and incorporate in business planning any specific
Appropriate credit covenants may be stipulated where required as
action points over the transition period. In addition, the Audit
trigger events to call for collaterals or terminate a transaction and
Committee of the Board of Directors oversees the progress of
contain the risk. Where the Bank enters into foreign currency
the IND-AS implementation process.
derivative contracts not involving the Indian Rupee with its
customers, it lays them off in the inter-Bank market on a matched The Bank has undertaken a diagnostic analysis of the
basis. For such foreign currency derivatives, the Bank primarily differences between the current accounting framework and
carries the counterparty credit risk (where the customer has IND-AS, including the disclosure requirements.The Bank is
crystallised payables or mark-to-market losses). The Bank also currently in the process of finalising its accounting policies
deals in derivatives on its own account, including for the purpose of under IND-AS. The Bank has evaluated the systems requiring
its own balance sheet risk management. significant changes and identified additional system and
process requirements for implementation of IND-AS. The Bank
Given the regulatory requirement of holding government is engaging with vendors for technology solutions for
securities to meet the Statutory Liquidity Ratio (SLR) implementation of IND-AS. The Bank undertakes training
requirement, your Bank maintains a portfolio of Government programs for its personnel in business and support functions.
Securities. While a significant portion of these SLR securities
are held in the ‘Held-to-Maturity’ (HTM) category, some of The implementation of IND-AS is expected to result in
these are held in the ‘Available for Sale’ (AFS) category. Your significant changes to the way the Bank prepares and presents
Bank is also a Primary Dealer for Government Securities. As a its financial statements. The areas that are expected to have
part of this business, as well as otherwise, the Bank holds fixed significant accounting impact on the application of IND-AS are
income securities in the ‘Held for Trading’ (HFT) category. summarised below:

HDFC Bank Limited Annual Report 2016-17 22


Directors' Report
HDFC Bank Limited Annual Report 2016-17

5888 Financial assets (which include advances and


investments) shall be classified under amortised cost, fair
value through other comprehensive income (a component
of Reserves and Surplus) or fair value through profit/loss
categories on the basis of the nature of the cash flows and
the intention of holding the financial assets.

5889 Interest will be recognised in the income statement


using the effective interest method, whereby the coupon,
fees net of transaction costs and all other premiums or
discounts will be amortised over the life of the financial
instrument.

5890 Stock options will be required to be fair valued on the


date of grant and be recognised as staff expense in the
income statement over the vesting period of the stock
options.

5891 The impairment requirements of IND-AS 109, Financial


Instruments, are based on an Expected Credit Loss (ECL)
model that replaces the incurred loss model under the extant
framework. The Bank will be generally required to recognise
either a 12-Month or Lifetime ECL, depending on whether there
has been a significant increase in credit risk since initial
recognition. IND-AS 109 will change the Bank’s current
methodology for calculating the provision for standard assets
and non-performing assets (NPAs). The Bank will be required
to apply a three-stage approach to measure ECL on financial
instruments accounted for at amortised cost or fair value
through other comprehensive income. Financial assets will
migrate through the following three stages based on the
changes in credit quality since initial recognition:

Stage 1: 12 Months ECL

For exposures which have not been assessed as credit-


impaired or where there has not been a significant increase in
credit risk since initial recognition, the portion of the ECL
associated with the probability of default events occurring
within the next twelve months will need to be recognised.

Stage 2: Lifetime ECL-Not Credit Impaired

For credit exposures where there has been a significant


increase in credit risk since initial recognition but are not credit-
impaired, a lifetime ECL will need to be recognised.

Stage 3: Lifetime ECL- Credit Impaired

Financial assets will be assessed as credit impaired when one


or more events having a detrimental impact on the estimated
future cash flows of that asset have occurred. For financial
assets that have become credit impaired, a lifetime ECL will
need to be recognised.
Interest revenue will be recognised at the original effective
interest rate applied on the gross carrying amount for assets
falling under stages 1 and 2 and on written down amount for
the assets falling under stage 3.

23 Accounting impact on the application of IND-AS at the


transition date shall be recognised in Equity (Reserves and
Surplus).

Information Technology

A pioneer in digital banking among private banks in India, your


Bank has a following firsts to its credit:
5888 #ENTRALIZED #ORE#"ANKING

3YSTEM ss %NTERPRISESDATA

WAREHOUSE

ss /NLINE REALETIME CENTRALISED !

4- SWITCH ss $EBITBCARDS
ss !NALYTICAL #2- SYSTEM FOR DIRECTIMARKETINGI ss

3OLUTION TOICHECKKRETAIL

LOANIAPPLICATIONNFRAUD ss -OBILE BANKING APP

ss 3-3-BASEDBMOBILE COMMERCE

The list has only been growing. The recent ones being the ‘10
Second Loan’ and ‘Digital Loan Against Securities’ (Digital LAS).
Technology has enabled your Bank to improve process and system
efficiencies, scale up and offer customer convenience across the
country. To address the infrastructure limitations in deep
geographies, branches and ATMs have been commissioned using
both fixed line and mobile broadband telecom networks. Bandwidth
acceleration and compression technology has been implemented
to improve telecom network speeds in rural/semi urban branches.
QuickBanking, a mobile app catering to the off-line Internet has
been further enhanced this year to incorporate Unified Payment
Interface (UPI) which rides on the USSD 2.0 platform of National
Payments Corporation of India and enables fund transfer to
beneficiaries across banks on a 24*7 basis.

Cyber Security

Your Bank has set up an effective governance framework to


manage cyber security. A suitable organisational structure has
been put in place to monitor various cyber security threats and
minimize them. In order to protect critical assets from cyber
attacks, the Cyber Security Operations Center (SoC) operates
on a 24*7 basis. In the year under review, your Bank further
enhanced SoC to manage, respond and resolve cyber security
incidents in an effective/timely manner.

23
Directors' Report

Further your Bank conducts:

23 2EGULARU VULNERABILITYL ASSESSMENTSS ANDN


PENETRATIONI TESTSS to assess/ remedy vulnerabilities
in applications and IT infrastructure

5888 !NTI
PHISHINGHSERVICESCHAVE BEEN SUBSCRIBED TO ENSURE THAT
the phishing sites are shutdown in a timely manner and customers
prevented from being lured to fraudulent sites

23 2ISK ENGINE ANDN TRANSACTIONC MONITORINGN


SYSTEMST ARER implemented to monitor suspicious transactions
on Internet Banking, ATM and e-commerce channels

5888 (UMANS BEINGI THEH WEAKESTS LINK IN CYBERB SECURITY


YOURU
Bank has been carrying out continuous awareness among
employees and customers
branches, ATMs as well as the digital ones like the Internet and
5888 4HEHCRITICAL WEBSITESIOF THEH"ANK ARERSCANNEDNANDNMONITOREDT
Mobile. Your Bank has therefore augmented the training and
continuously for early detection of any malware
skill development mechanism to empower and equip
A testimony to the Bank’s crisis preparedness is that it has employees to deliver improved quality of customer service, as
secured PCI DSS 3.0 certification and ISO 27001 certification well as put in place a more stringent grievance monitoring and
for its critical information assets. Its efforts have been further redressal mechanism. Mystery shopping activities using decoy
recognized through awards from IDRBT, DSCI-NASSCOM for customers are also undertaken across branches and retail
various cyber security initiatives. asset centres to continuously evaluate regulatory compliance,
process adherence and quality of service delivery to
Particularly in the year under review, your Bank made significant customers. The findings are worked upon using Lean and Six
investments in strengthening protection against Distributed Denial Sigma methodologies to bring in process improvements. The
of Service (DDoS) attacks and Web Application Firewall (WAF). effectiveness of these measures is reviewed periodically at
Various simulation exercises were carried out to learn from different levels including the Customer Service Committee of
techniques like ethical hacking and smoke screen & decoy testing. the Board. In addition to the aforementioned measures, in
The Bank also participated in IDBRT’s cyber security drills to compliance with regulatory guidelines, your Bank has
identify weak links and strengthen defence. It will continue to appointed a senior retired banker as Internal Ombudsman.
invest further in the coming years in the areas of cyber security to
As a result of the continued focus on customer service, your
take it to the next level.
Bank has received written appreciation from many Banking
During the year under review, it implemented a 3-way disaster Ombudsmen appointed by Reserve Bank of India across
recovery solution for its Core Banking platform. This ensured locations such as Andhra Pradesh, Chhattisgarh, Goa, Gujarat,
that Core Banking Systems went without any prolonged Himachal Pradesh, Kerala, Lakshadweep, Madhya Pradesh,
outage. In addition, your Bank has a well-rehearsed disaster Maharashtra, Odisha, Puducherry, Punjab, Sikkim, Tamil Nadu
recovery set-up, so as to ensure 99.5 per cent up-time of and West Bengal.
important applications.
Risk Management and Portfolio Quality
Service Quality Initiatives
The Bank is exposed to risk by the very nature of its business.
A regular process of reviewing the service levels and capturing These can be classified as:
feedback from customers is undertaken for continuous
23 #REDIT 2ISKTINCLUDINGK2ESIDUAL
improvement in product, processes and services. The multi-
channel strategy of the Bank necessitates real-time monitoring 2ISKS ss #REDIT #ONCENTRATIONI2ISK
of customer experience, securing feedback and response. This
ss -ARKET 2ISK2
process is critical as the customer can now access the Bank’s
services across traditional touchpoints like ss "USINESS 2ISK

ss /PERATIONALO2ISK

ss 3TRATEGIC 2ISK
HDFC Bank Limited Annual Report 2016-17
ss )NTEREST 2ATES2ISK

INATHEE"ANKINGS"OOK ss #OMPLIANCE 2ISK

ss ,IQUIDITYI2ISK

ss 2EPUTATION 2ISK

ss )NTRADAYY2ISK ss

-ODELD2ISK

ss 4ECHNOLOGYO2ISK

24
Directors' Report

1024 #OUNTERPARTY Assets (NPAs) to gross advances was 1.05 per cent.
#REDITR2ISK ss Net Non-Performing Assets (Gross Non-Performing Assets less
/UTSOURCINGU2ISK
Specific Loan Loss provisions) was 0.3 per cent of Net
Advances as on March 31, 2017. Total restructured assets
ss 'ROUPO2ISK COVERINGN($"&3, AND (3, (including applications under process for restructuring) was
0.06 per cent of gross advances as on March 31, 2017. As a
These material risks are factored in while determining the matter of abundant caution, the Bank provides more than
capital requirements. The most important of these are Credit regulatory requirements for its NPAs while adhering to
Risk, Market Risk, Liquidity Risk and Operational Risk which regulatory norms for the provision of Standard Assets.
are explained below. Identifying, measuring, monitoring and
managing these are critical to balancing the risk-return trade off Market Risk
and determining the ultimate success of the Bank.
This arises out of the Bank’s trading portfolio and is managed
Your Bank has a Board approved risk strategy and policy in through a well-defined Board approved investment policy which
place. The implementation of this well-defined policy is caps exposures to various securities through stringent trading
supervised by the Risk Policy and Monitoring Committee of the risk limits/triggers. These include position limits, gap limits,
Board. The committee periodically reviews risk level and tenor restrictions, sensitivity limits viz. PV01, Modified Duration
direction, portfolio composition, status of impaired credits as of Hold To Maturity Portfolio and Option Greeks, Value-at-Risk
well as limits for treasury operations. (VaR) Limit, Stop Loss Trigger Level (SLTL) and Potential Loss
Trigger Level (PLTL). This is backed up further by a Board
Credit Risk approved stress testing policy and framework which simulates
various market risk scenarios in order to measure losses and
The Bank has a comprehensive centralised risk management initiate control measures.
function, independent of the operations and business units of the
Bank. Distinct policies, processes and systems are in place for the Liquidity Risk
Retail and Wholesale Lending businesses. In the Retail Loan
business, the credit cycle is managed through appropriate front- The framework for liquidity and interest rate risk management
end credit, operational and collection processes. For each product, is established in the Bank’s Asset Liquidity-Management policy
programmes defining customer segments, underwriting standards which is in line with regulatory requirements. Your Bank has
and security structure are specified to ensure consistency of credit established various Board approved limits like maturity gap
buying patterns. Given the granularity of individual exposures, limits and limits on stock ratios for liquidity risk and limits on
retail credit risk is monitored largely on a portfolio basis, across income impact and market value impact for interest rate risk.
various products and customer segments. For wholesale credit Your Bank’s Asset Liability Committee (ALCO) is responsible
exposures, management of credit risk is done through target for adherence to liquidity risk and interest rate risk limits.
Additionally, your Bank has a comprehensive Board approved
market definition, appropriate credit approval processes, ongoing
stress testing programme covering liquidity and interest rate
post-disbursement monitoring and remedial management
risk which is aligned with the regulatory guidelines. The
procedures. Overall portfolio diversification, prudential ceilings
Liquidity Coverage Ratio (LCR) is a global minimum standard
across various dimensions (individual/ borrower group, industry,
for Bank liquidity. The ratio aims to ensure that a bank has an
credit risk rating grades and country), product mix, security
adequate stock of unencumbered High-Quality Liquid Assets
structures and periodic as well as proactive reviews facilitate risk
(HQLA) that can be converted into cash easily and immediately
mitigation and management.
to meet its liquidity needs for a 30-day calendar liquidity stress
The asset quality of the Indian banking industry continued to be scenario. In June 2014, RBI released Basel III Framework on
Liquidity Standards-Liquidity Coverage Ratio (LCR), Liquidity
under severe pressure due to macroeconomic factors as well
Risk Monitoring Tools and LCR Disclosure Standards. Based
as sector specific issues. The banking industry on an overall
on the guidelines, LCR became effective on January 1, 2015.
basis saw a sharp increase in stress and non-performing
assets. Your Bank did not witness any significant deterioration The minimum requirement for the ratio was 80 per cent on January
in overall asset quality and continues to maintain the highest 1, 2017. This was to increase by 10 percentage points every year
standards of governance in respect of recognition and to touch 100 per cent on January 1, 2019. The Bank’s average
provisioning of non-performing loans. LCR was in excess of this stipulation and was 99.52 per cent on a
consolidated basis for the quarter ended March 31, 2017.
As on March 31, 2017, your Bank’s ratio of Gross Non-Performing

25
HDFC Bank Limited Annual Report 2016-17
Directors' Report

In accordance with RBI’s guidelines, the Bank is currently on reporting line to the Chairman of the Audit Committee of the Board
the Standardized Approach for Credit as well as Market Risk and only a dotted line reporting to the Managing Director. The Audit
and the Basic Indicator Approach for Operational Risk. It is at Committee of the Board also reviews the performance of the audit
the same time progressing towards migrating to an advanced and compliance functions and reviews the effectiveness of controls
approach for these risks when permitted by the regulator. The and compliance with regulatory guidelines.
Bank has a structured management framework in the Internal
Capital Adequacy Assessment Process (ICAAP) for the Corporate Social Responsibility (CSR)-Creating
identification and evaluation of the significance of all risks that Sustainable Communities
the Bank faces, which may have a material adverse impact on
‘Creating Sustainable Communities’ is the underlying
its business and financial position and the adequacy of capital
philosophy that drives your Bank’s CSR initiatives and it
to cover these risks.
springs from one of its Core Values: Sustainability. The
Its Board approved Stress Testing Policy and Framework entails objective is to enable families break the vicious circle of poverty
the use of various techniques to assess potential vulnerability to and draw them into a cycle of growth, development and
extreme but plausible stressed business conditions. The changes empowerment without disturbing the ecological balance.
in the levels of various risks and the changes in the on and off
Your Bank is committed to identifying and supporting outreach
balance sheet positions of the Bank are assessed under such
programmes aimed at developing and advancing the
assumed scenarios and sensitivity factors which generally relate to
community in this manner. The Bank works through
the impact on its profitability and capital adequacy.
partnerships with Non-Governmental Organisations (NGOs) as
Operational Risk well as directly through its various businesses to create social
value through its products and services.
A Board approved Operational Risk Management Framework
has been put in place which is implemented by a dedicated Your Bank’s Holistic Rural Development Programme (HRDP) is
team within the Risk Management function. A bottom up risk its flagship CSR initiative. This programme aims to improve the
control self-assessment process identifies high risk areas, economic and social conditions of the villages where it
potential gaps and serves as an early warning system so that operates. The focus areas of HRDP are Promoting Education;
remedial measures can be initiated in a timely manner. Skills Training and Livelihood Enhancement; Natural Resources
Management; Healthcare and Hygiene; Financial Literacy and
Internal Controls, Audit and Compliance Inclusion. Under the programme, the Bank is working in over
500 villages across 14 states in the country.
Your Bank has Internal Audit and Compliance functions which are
responsible for independently evaluating the adequacy of all Promoting Education
internal controls and ensuring operating and business units adhere
to internal processes and procedures as well as to regulatory and Your Bank’s education programmes are structured to create a
legal requirements. The audit function also proactively conducive and effective learning environment in schools. This
recommends improvements in operational processes and service includes providing basic infrastructure, teacher training,
quality. To mitigate operational risks, the Bank has put in place learning improvements, scholarships and career guidance
extensive internal controls including audit trails, appropriate programmes. The programmes are spread across a wide
segregation of front and back office operations, post transaction geography and close to 900 schools are being covered.
monitoring processes at the back end to ensure independent
The distinctiveness of these programmes is the focus on
checks and balances, adherence to the laid down policies and
improving the skills of teachers, which in turn benefits the
procedures of the Bank and to all applicable regulatory guidelines.
students. More than 65,000 students have benefitted through
The internal audit function also carries out management self-
these programmes.
assessment of adequacy of the Bank’s internal financial controls
and operating effectiveness of such controls in terms of Sarbanes Through the Zero Investment Innovation for Educational
Oxley (SOX) Act and Companies Act, 2013. Your Bank has always Initiatives (ZIIEI), your Bank has reached out to more than 5.5
adhered to the highest standards of compliance and governance lakh school teachers. ZIIEI is a unique platform to implement
and has put in place controls and an appropriate structure to best practices in education across more than 75,000 schools in
ensure this. To ensure independence, the internal audit function Uttar Pradesh. The project has been executed jointly with a
has a leading NGO for the state government.

HDFC Bank Limited Annual Report 2016-17 26


Directors' Report

Skills Training and Livelihood Enhancement Financial Literacy

To create a sustainable community, your Bank believes that Financial literacy is the first step towards real financial inclusion.
people must have a steady source of income which will With this belief, the Bank conducts financial literacy workshops for
contribute to a thriving economy. To this end, the Bank provides communities to enable them to make smart financial decisions and
sustain themselves. These workshops are executed through the
skills training and development to enable beneficiaries to earn
Bank’s business units as well as its NGO partners.
a living, with a special focus on women and youth. Your Bank
addresses this need through multiple projects ranging from Dhanchayat, is the Bank’s financial literacy programme on
competency-based skill-oriented training and placement, wheels and this has been running successfully, making more
capacity building, promoting entrepreneurial activities and and more people in the rural areas aware of the perils of
upskilling for agricultural and allied practices. These initiatives informal banking. Your Bank also disseminates information on
are tailor-made programmes that focus on addressing the general banking, credit counselling and digital banking across
specific needs of a community. a wider society such as schools, colleges, pensioners and
senior citizens.
Nearly 16,000 individuals have benefited through the Bank’s
Over 40 lakh households have benefited from the Bank’s
efforts in skills based training. It has supported more than financial literacy drive.
1,100 individuals to become entrepreneurs. The projects are
spread across varied geographies from Jammu & Kashmir in Financial Inclusion
the North, Meghalaya in the North East, Tamil Nadu in the
Your Bank is fully committed to digital transactions and the recent
South to Gujarat in the West. One of the projects to provide
push given to it by the Union Government. It now offers last mile
job-based skills training in Uttar Pradesh, has benefitted more access through mobile applications like BHIM, UPI, USSD, Scan &
than 5,000 individuals. Pay as well as Aadhaar and RuPay enabled Micro-ATMs.

Natural Resource Management In another ongoing effort to bring more of the under-banked
sections of the population into formal financial channels, your Bank
While working on issues such as livelihood and water, your has opened over 17 lakh accounts under the Pradhan Mantri Jan
Bank makes a concerted effort towards managing local natural Dhan Yojana (PMJDY) and enrolled over 26 lakh customers in
resources. The multi-focused interventions include the areas of social security schemes since inception. It now ranks among the
soil and water conservation, water management, construction, leading private sector banks in this regard. Loans to the tune of `
renovation and maintenance of water harvesting structures for 5,522.5 crore were extended under the Pradhan Mantri Mudra
improving surface and ground water availability as well as for Yojana (PMMY) and nearly ` 143.5 crore under the ‘Stand Up India’
promoting organic fertilisers and renewable energy. scheme to Scheduled Caste/Scheduled Tribe women borrowers in
the year under review.
Your Bank has planted more than 67,000 trees, with the twin
Environment Sustainability
objectives of developing horticulture and ensuring top soil retention
for better agriculture yield. A little over 3,800 acres of agricultural Maintaining a balance between the natural capital and communities
land has been treated for enhanced agricultural produce. In order is now integral to the Bank’s functioning. Towards this end, your
to provide proper irrigation support more than 200 water harvesting Bank’s ATMs have gone paperless, enabling reduction of carbon
structures have been constructed or renovated. Crop diversification footprint. The Bank has given this effort a further fillip by ensuring
multi-channel delivery through NetBanking, PhoneBanking and
has been carried out in over 840 acres for higher output as well as
MobileBanking. This reduces carbon emission from operations as
enriched fertility of the soil.
well as on account of reduced customer travel requirements.
Another source for reducing the environmental footprint is solar
Healthcare & Hygiene
ATMs. These use rechargeable Lithium Ion batteries that reduce
Your Bank promotes the cause of good hygiene and sanitation power consumption.
practices in the community. Towards this end, the Bank
Blood Donation Campaign
supports construction of toilets and provision of clean drinking
water facilities. Close to 7,500 households and 900 schools in The year 2016 was a milestone year for the campaign for two
rural India have been covered under the toilet programme so reasons. One, it was its 10th year. Two, it witnessed record
far. A primary healthcare centre was set up in the flood affected participation in terms of cities, camps and colleges resulting in
regions of Uttarakhand, which benefited around 50,000 people. over 1.7 lakh blood units being collected from more than 2 lakh

HDFC Bank Limited Annual Report 2016-17 27


Directors' Report

people. The tie up with corporate and defence establishments With about half of India’s population living on agriculture, this is
to organise camps at their premises also helped in the an important business segment for the Bank. The suite of
unprecedented collection. products offered include the Kisan Gold Card, Tractor and
Cattle Loans. Apart from loans directly linked to agriculture, the
Sustainable Livelihood Initiative (SLI) Bank offers other credit products such as two-wheeler loans,
car loans, loans against gold jewellery and mortgage loans.
Your Bank’s Sustainable Livelihood Initiative (SLI) is about
‘Creating Sustainable Communities’ by empowering people, and The Kisan Gold Card is now being offered in 60,000 villages.
helping them break the vicious circle of poverty. The Bank takes Your Bank has designed a range of crop and geography
immense pride in stating that through its Board mandated SLI, it specific products keeping in mind the harvest cycles and local
has made a difference in the lives of lakhs of women at the bottom needs of farmers spread across diverse agro climatic zones.
of the pyramid by creating long-term sustainable solutions rather Credit is targeted at allied agricultural activities like dairy,
than just providing short-term relief. pisciculture and sericulture through specific products.

The basic premise of the SLI model is that empowering women Using technology, your Bank is able to deliver some loans
means empowering families. Women participants form Self within three working days in select geographies, and loan
Help Groups (SHGs) or Joint Liability Groups (JLGs) that are enhancements in a few seconds through ATMs or mobile
nurtured by the Bank’s employees. The approach under SLI phones. The Bank also enables faster cash flows to the farmer
covers occupational skills training, financial literacy, credit through products like post-harvest Cash Credit and Warehouse
counselling, livelihood finance and market linkage. Today, SLI Receipt Financing.
is harnessing the collective power of women’s groups to make
an impact in village communities by implementing health and HDFC Bank’s focus in the rural markets has not just been on
sanitation programmes. increasing credit off-take but also on cementing relationships
with customers by empowering them. As a part of these efforts,
Apart from the holistic approach, what makes this programme 11 Kisan Dhan Vikas Kendras have been rolled out across
one-of-its-kind in the world is its scale. Sample this; 8,000 Punjab, Maharashtra, Uttar Pradesh and Madhya Pradesh
dedicated bank employees working with millions of people at where farmers secure information on soil health, mandi prices,
the bottom of the pyramid in trying conditions driven purely by various government initiatives and expert advice. These
a passion to transform lives. services are also available on the Bank’s website in vernacular
languages. Advisories on weather, cropping and harvesting are
The SLI programme is being accelerated further through also shared through SMS.
digitisation notwithstanding hurdles like poor awareness and
telecom infrastructure. These are being overcome by using Milk-to-Money (MTM)
platforms like USSD which work on feature phones.
Furthermore, to facilitate card-based transactions, the Bank The Bank’s MTM footprint (including Micro ATMs) crossed the
has installed PoS machines in more than 200 villages. landmark of 1,000 in the year under review. Approximately 3.17
lakh farmers are covered across 16 states including Gujarat,
At the end of the year under review, 68 lakh households in 25 Maharashtra, Punjab and Rajasthan. Farmers receive Direct
states were covered through this programme. These include Benefit Transfers from the Government in the same account.
Assam, Bihar, Chhattisgarh, Meghalaya, Madhya Pradesh,
Odisha, Rajasthan, Sikkim, Tripura, Uttar Pradesh and Under this initiative, Multi-function Terminals (MFTs), popularly
Uttarakhand. known as Milk-to-Money ATMs, are deployed in dairy societies.
The MFTs link the milk procurement system of the dairy society
The disclosures pertaining to CSR as required under Rule 8 of to the farmers’ account to enable faster payments. MFTs have
the Companies (Accounts) Rules, 2014 have been given in cash dispensers that function as standard ATMs. The
ANNEXURE 2 to this report. transparency in the milk collection process benefits both
farmers and society. Payments are credited without the
Agriculture & Allied Activities difficulties associated with the cash distribution process. What
is more, this creates a credit history which can then be used as
Your Bank’s credit to Agriculture & Allied activities stood at the basis for accessing bank credit. Apart from the Dairy and
4 77,921 crore on March 31, 2017 representing an increase Cattle Loans, customers gain access to all bank products
of about 17 per cent over the March 31, 2016 figure of including digital offerings such as 10 Second Personal Loans,
1024 66,890.4 crore. Kisan Credit Card, Bill Pay and Missed Call Mobile Recharge.

HDFC Bank Limited Annual Report 2016-17 28


Directors' Report

Loans against Gold Jewellery The Bank hosted the 2nd Digital Innovation Summit in February
2017 to tap into the fin-tech and start-up ecosystem and harness
As on March 31, 2017, Loans against Gold Jewellery stood at
the emerging technological trends. In the 2 nd Digital Innovation
4 4,800 crore as against ` 4,531 crore on March 31, 2016.
Summit, the Bank invited entries in rural fin-tech category as well
Banks have started making inroads in a market traditionally along with submissions in other categories. Five companies have
dominated by the unorganised sector and pawn brokers. The been chosen as winners, whose solutions the Bank is evaluating
entry of such players has resulted in increased awareness, and for potential application. These companies are in Artificial
at the same time provided greater transparency by substituting Intelligence, Marketing, Mobile Payments, Quality Assurance and
the money lenders. The availability of the asset and the ease of Biometric Payments domains with special focus on solutions that
securing a loan have made this a convenient and viable credit will help semi-urban and rural customers.
option.
Some of the major digital innovations introduced in the year
Micro, Small and Medium Enterprises (MSME) ended March 31, 2017 are:

The year under review has been a challenging but defining one for 4 Interactive Humanoid ‘IRA’: HDFC Bank now has a
the MSME business. Demonetisation was a temporary setback for humanoid, IRA, which is a technology demonstrator in the
a business whose customers traditionally transact in cash. Your field of artificial intelligence and robotics. It can support
Bank was able to overcome this in the last quarter. The Bank’s customer service.
advances to MSMEs grew by 14.4 per cent to touch
5 HDFC Bank’s Virtual Assistant ‘EVA’: An Artificial
1024 85,166.6 crore on March 31, 2017 from ` 74,657.3
Intelligence based customer service chatbot deployed on
crore on March 31, 2016.
your Bank’s website that responds to customer queries and
Demonetisation and the advent of the next-generation of provides product information.
entrepreneurs has seen a steady shift towards digital
transactions. In what could be a potential game changer for the 6 HDFC Bank OnChat: Your Bank has forayed into social
business, the Bank launched a complete online solution-the media banking to reach out to the millennial customers. At
‘SM@Bank’. Through this, customers can access-credit facility present, customers and non-customers can complete e-
information, request adhoc/temporary overdraft facilities, ask commerce transactions on Facebook Messenger.
for new facilities and submit documents to the Bank for straight
7 Expense Tracker: This personal financial management
through processing on a 24*7 basis. This gained significant
tool gives customers a snapshot of their income, expenses,
traction in the very first year and is now poised to gain further
and investments and helps them secure control over their
momentum.
finances. This enhancement in your Bank’s MobileBanking
Within this segment, the Bank continued its approach of app has received encouraging customer response.
targeting the manufacturing, retailing, wholesale, trading, and
8 Other innovations like PayZapp, SmartBuy and the 10
services sectors.
second personal loan continued to gather momentum in the
Innovation year under review.

Your Bank has embarked on a ‘Mobile First’ digital strategy that People
builds on the last two decades of investment in technology.
Your Bank believes that the key to building an organization is
This strategy enables your Bank to offer an entire spectrum of
banking products which can now be accessed not only on high- People. The philosophy of the Bank can be summarised as:
end smart phones and tablets, but also on feature phones that Hiring right talent and retaining them by creating a conducive
require little or no Internet connectivity. environment through a combination of financial and non-
financial incentives. Besides innovation, the organization also
As you are aware, digital innovation has been the prime driver fosters a culture of empowerment and ownership. This paid-off
across businesses for the last two years. It has got further during demonetisation, when our employees went well beyond
impetus with emphasis on artificial intelligence, chatbots and the call-of-duty to make customers comfortable. In an
machine learning enabling your Bank to offer a superior extremely chaotic environment with crises erupting by the day,
customer experience. they came up with creative solutions.

HDFC Bank Limited Annual Report 2016-17 29


Directors' Report

To reiterate the five broad pillars of HDFC Bank’s People The Bank encourages employees to participate in community
Strategy are: and social work. Through your Bank’s Employee Payroll Giving’
programme, personnel can choose to donate a certain amount
5888 Resourcing and Hiring: In an industry where agility
from their salary each month towards specific social causes.
in talent acquisition and deployment is key to geographic
expansion and growth, your Bank has leveraged online The other flagship programmes are the Blood Donation Drive
recruitment along with other channels like job-ready model
and the Bank’s volunteering programme which entails
to develop reach and quality of hires. It has created a
employees imparting financial literacy and contributing to relief
strong leadership pipeline across levels by identifying the
right talent internally and grooming them for challenging efforts in case of natural calamities.
roles. This has resulted in an 84,000 plus work force that is
‘HDFC Bank Cares’ is an initiative to address healthcare needs
well motivated and trained to deliver value to the customer.
of employees. Benefits under this programme include health
Increased digitisation, improved process efficiencies and
rebalancing capacities over the years has led to a small mailers, doctor on call, health check-up camps and talks on
decrease in the employee base. wellness by experts. The Bank runs an on-site crèche at
Kanjurmarg, Mumbai.
23 Career Management: Your Bank’s talent management
processes create opportunities for employees to develop These initiatives create a connect among employees and also
and grow. The systematic investment of time in career helps them forge an emotional bond with the organization.
discussion with employees, competency assessment and Further, a strong feedback mechanism helps shape the
intensive functional as well as behavioural training through programmes and aligns them with people’s expectations and
the Gurukul programmes reiterate the Bank’s commitment organisation policies.
to employees on career progression.
23 Training and Development: Training plans are developed
5888 Employee Engagement: The Bank has nurtured an based on analysis of training needs identified in consultation
enabling performance culture in line with its vision to be a
with various businesses. An extensive bouquet of training
`World Class Indian Bank’. The Performance Management
programmes are delivered covering on-boarding, product and
System aligns organization goals with key objectives for
each business. Role-based scorecards at the employee process training, advanced programmes and behavioural
level coupled with managerial feedback provide clarity and training. The on-boarding training ensures that new employees
support to help employees excel. are trained comprehensively and equipped with necessary
know-how, as well as functional and behavioural skills required
In addition, your Bank strives to strengthen its connect with for the role. The product training and advanced programmes
employees. The Bank conducted an employee survey to enable skill development, regular updates and build expertise.
understand various aspects of their experience and
The training methodology has evolved to application based
followed through with appropriate interventions spanning
training including simulations, case studies and games.
from the local to pan-Bank level. The Bank also conducts
Leveraging technology, many of the class room programmes
several employee engagement events, both at local and
national levels. are now being delivered through online mode. The role specific
learning plan ensures effective use of blended learning method.
5888 Josh Unlimited: Pan-India Sports event conducted in
27 cities 24 Rewards: Merit is the driving force in the organisation and
objectivity the watchword while rewarding employees on a
5889 Stepathlon: An Employee Wellness initiative that saw financial and non-financial basis. This fair and equitable
the participation rise by 1,000 to about 3,500 approach encourages people to give their best. The
5890 Hunar: Pan-India in-house talent competition compensation policy ensures that remuneration is not only
competitive but also includes wealth creation opportunities
5891 Corporate Online Library: A knowledge resource through long-term rewards like ESOPs. Your Bank’s
available to all employees for accessing nearly 1.5 lakh comprehensive compensation policy is aligned with the
books guidelines of the Reserve Bank of India. The ‘Star Awards’
is an institutionalised recognition programme that
5892 Employees can also participate in the ‘HDFC Bank
Voice Hunt Contest’ in association with Shankar periodically recognizes performers. The ‘Tejaswini Awards’
Mahadevan Academy and ‘Corporate Photography is a special category to recognize women achievers.
Contest’ which is an inter-corporate event.

30
HDFC Bank Limited Annual Report 2016-17
Directors' Report

Other Statutory Disclosures

Board and Board Committees

The details of Board meetings held during the year, attendance


of Directors at the meetings and constitution of various
Committees of the Board are included separately in the
Corporate Governance Report.

Extract of Annual Return

Pursuant to section 92 (3) of the Companies Act, 2013 and


Rule 12 (1) of the Companies (Management and
Administration) Rules, 2014, the extract of the Annual Return is
annexed as ANNEXURE 3 to this report.

Directors’ Responsibility Statement

Pursuant to Section 134 (3) (c) read with Section 134 (5) of the
Companies Act, 2013, the Board of Directors hereby state that:

0 )N THEH PREPARATIONI OF THEH ANNUALA ACCOUNTS


THEH APPLICABLE accounting standards have been followed along
with proper explanation relating to material departures, if any

0 7E HAVEESELECTED SUCH ACCOUNTING POLICIES


Fees (including taxes) ` lacs
ANDNAPPLIEDLTHEM consistently and made judgments and
estimates that are reasonable and prudent so as to give a true and Statutory Audit (` 1,90,00,000 plus taxes) 218.50
fair view of the state of affairs of the Bank as on March 31, 2017 Certification & other services provided as statutory 39.08
and of the profit of the Bank for the year ended on that date auditors
Total 257.58
← 7E HAVEETAKEN PROPER ANDNSUFlCIENTCCARE FOR
THEHMAINTENANCEE of adequate accounting records in
Members are requested to consider their re-appointment for
accordance with the provisions of the Companies Act, 2013
financial year 2017-18.
for safeguarding the assets of the Bank and for preventing
and detecting fraud and other irregularities Disclosure under Foreign Exchange Management Act, 1999

← 7E HAVEEPREPARED THEHANNUALAACCOUNTS ON The Bank is in compliance with the Foreign Exchange


AAGOINGICONCERNN basis Management Act, 1999 (FEMA) provisions with respect to
downstream investments made in its subsidiaries. Further, the
← 7E HAVEELAID DOWN INTERNALAlNANCIAL CONTROLS
Bank has obtained a certificate from its statutory auditors
TO BE FOLLOWED by the Bank and that such internal
certifying that the Bank is in compliance with the FEMA
financial controls are adequate and were operating effectively
provisions with respect to downstream investments made in its
← 7E HAVEEDEVISEDSPROPER SYSTEMS TORENSURE subsidiaries in the year under review.
COMPLIANCE WITH the provisions of all applicable laws and that
Related Party Transactions
such systems were adequate and were operating effectively
Particulars of transactions with related parties referred to in
Auditors Section 188 (1), as prescribed in Form AOC-2 under Rule 8 (2)
of the Companies (Accounts) Rules, 2014 is enclosed as
The Auditors, M/s. Deloitte Haskins & Sells, Chartered
ANNEXURE 4.
Accountants, will retire at the conclusion of the forthcoming
Annual General Meeting and are eligible for re-appointment. Particulars of Loans, Guarantees or Investments
During the year under review, fees paid to the auditors were as
follows: Pursuant to Section 186 (11) of the Companies Act, 2013, the
provisions of Section 186 of Companies Act, 2013, except sub-
section (1), do not apply to a loan made, guarantee given or
security provided by a banking company in the ordinary course
HDFC Bank Limited Annual Report 2016-17 of business. Further, in terms of the Companies (Removal of
Difficulties) Order, 2015, nothing in Section 186 except sub
section (1) shall apply to any acquisition made by a banking
company in the ordinary course of business. The particulars of
investments made by the Bank are disclosed in Schedule 8 of
the Financial Statements as per the applicable provisions of
Banking Regulation Act, 1949.

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with
Rule 8 (1) of the Companies (Accounts) Rules, 2014 the
performance and financial position of the Bank’s subsidiaries and
associates are enclosed as ANNEXURE 5 to this report. There
were no entities which became or ceased to be the Bank’s
subsidiaries, associates or joint ventures during the year, except
Atlas Documentary Facilitators Company Private Limited and HBL
Global Private Limited, associates of the Bank, which
amalgamated with the Bank’s subsidiary HDB Financial Services
Limited, pursuant to the approval of the Honourable

31
Directors' Report

High Court of Gujarat and Bombay with effect from December members of the NRC are placed before the NRC and the
1, 2016. The appointed date of the merger as per the scheme declarations of the members of the NRC are placed before the
of amalgamation was April 1, 2014. Board. Assessment on whether the Directors fulfil the said
criteria is made by the NRC and the Board on an annual basis.
Whistle Blower Policy/Vigil Mechanism In addition, the framework/policy approved by the NRC
provides for a performance evaluation of the Non-Independent
The Bank has adopted a Whistle Blower Policy pursuant to
Directors by the Independent Directors on key personal and
which employees of the Bank can raise their concerns relating
professional attributes and a similar performance evaluation of
to fraud, malpractice or any other activity or event which is
the Independent Directors by the Board, excluding the Director
against the interest of the Bank or society as a whole. Details
being evaluated. Such performance evaluation has been duly
of complaints received and the action taken are reviewed by
completed as above.
the Audit Committee. The functioning of the Whistle Blower
mechanism is reviewed by the Audit Committee from time to Policy on Appointment and Remuneration of Directors and
time. None of the Bank’s personnel have been denied access Key Managerial Personnel
to the Audit Committee.
The Nomination and Remuneration Committee (NRC)
Declaration by Independent Directors recommends the appointment of Directors to the Board. It
identifies persons who are qualified to become Directors on the
Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh,
Board and evaluates criteria such as academic qualifications,
Mr. A. N. Roy, Mr. Malay Patel and Mr. Umesh Chandra
previous experience, track record and integrity of the persons
Sarangi are Independent Directors on the Board of the Bank as
identified before recommending their appointment to the Board.
on March 31, 2017. All the Independent Directors have given
their respective declarations under Section 149 (6) and (7) of The remuneration of whole time Directors is governed by the
the Companies Act, 2013 and the Rules made thereunder. In compensation policy of the Bank. The compensation policy of the
the opinion of the Board, the Independent Directors fulfil the Bank, duly reviewed and recommended by the NRC has been
conditions relating to their status as Independent Directors as articulated in line with the Reserve Bank of India guidelines.
specified in Section 149 of the Companies Act, 2013 and the
Rules made thereunder. Your Bank’s compensation policy is aimed to attract, retain,
reward and motivate talented individuals critical for achieving
Board Performance Evaluation strategic goals and long term success. Compensation policy is
aligned to business strategy, market dynamics, internal
The Nomination and Remuneration Committee (NRC) has characteristics and complexities within the Bank. The ultimate
approved a framework/policy for evaluation of the Board, objective is to provide a fair and transparent structure that
Committees of the Board and the individual members of the Board. helps the Bank to retain and acquire the talent pool critical to
The said framework/policy was duly reviewed during the year. A building competitive advantage and brand equity.
questionnaire for the evaluation of the Board and its Committees,
designed in accordance with the said framework and covering Your Bank’s approach is to have a pay for performance culture
various aspects of the performance of the Board and its based on the belief that the Performance Management System
Committees, including composition and quality, roles and provides a sound basis for assessing performance holistically. The
responsibilities, processes and functioning, adherence to Code of compensation system should also take into account factors like
Conduct and Ethics and best practices in Corporate Governance roles, skills/competencies, experience and grade / seniority to
was sent out to the Directors. The responses received to the differentiate pay appropriately on the basis of contribution, skill and
questionnaires on evaluation of the Board and its Committees availability of talent on account of competitive market forces. The
were placed before the meeting of the Independent Directors for details of the compensation policy are also included in Schedule 18
consideration. The assessment of the Independent Directors on Notes forming part of the Accounts - Note no. 25. Non-Executive
the performance of the Board and its Committees was Directors are paid remuneration by way of sitting fees for attending
subsequently discussed by the Board at its meeting. meetings of the Board and its Committees, which are determined
by the Board based on applicable regulatory prescriptions. Non-
Your Bank has in place a process wherein declarations are Executive Directors are also reimbursed expenses incurred by
obtained from the directors regarding fulfilment of the ‘fit and them for attending meetings of the Board and its Committees at
proper’ criteria in accordance with the guidelines of the Reserve actuals. The remuneration payable to the Non-Executive Directors
Bank of India. The declarations from the Directors other than and Independent Directors is

HDFC Bank Limited Annual Report 2016-17 32


Directors' Report

governed by the provisions of the Banking Regulation Act, 1949, a period of three years commencing from January 2, 2018 till
RBI guidelines issued from time to time and the provisions of the January 1, 2021 or till such other earlier or later date(s) as may
Companies Act, 2013 and related rules to the extent it is not be approved by Reserve Bank of India, and as subsequently
inconsistent with the provisions of the Banking Regulation Act, extended by the Reserve Bank of India from time to time.
1949 and RBI guidelines. In terms of the guidelines issued by RBI
During the year, Mr. Srikanth Nadhamuni was appointed as an
for compensation of Non-Executive Directors of private sector
Additional Director of the Bank with effect from September 20,
banks dated June 1, 2015 and the approval of shareholders at the
2016 to hold office till the conclusion of the ensuing Annual
22nd Annual General Meeting, Non-Executive Directors of the
General Meeting. Mr. Nadhamuni has been appointed as a
Bank, other than the Chairperson, are paid profit-related
director having expertise in the field of Information Technology.
commission of ` 10,00,000/- (Rupees Ten Lakh only) per annum for
In terms of Section 152 of the Companies Act, 2013, it is
each Non-Executive Director. proposed to appoint Mr. Nadhamuni as a Director of the Bank
at the ensuing Annual General Meeting. The Bank has
Mr. Aditya Puri is the Non-Executive Chairman of HDB
received a notice from a member proposing his candidature as
Financial Services Limited, Bank’s subsidiary. Mr. Puri does not
Director of the Bank. Mr. Nadhamuni shall be liable to retire by
receive any remuneration from the subsidiary. None of the
rotation.
Directors of your Bank other than Mr. Puri is a director of the
Bank’s subsidiaries as on March 31, 2017. The brief resume/details regarding the Directors proposed to
be appointed/re-appointed as above are furnished in the report
Significant and Material Orders Passed
on Corporate Governance. There have been no changes in the
By Regulators
Directors and Key Managerial Personnel of the Bank other
During the financial year 2016-17, further to the media reports than the above.
in October 2015 about irregularities in advance import
Familiarisation Programme for Independent Directors
remittances in various banks, the Reserve Bank of India (RBI)
had conducted a scrutiny of the transactions carried out by the The various programmes undertaken for familiarising
Bank under Section 35 (1A) of the Banking Regulation Act, Independent Directors with the functions and procedures of the
1949. The RBI issued a Show Cause notice to which the Bank Bank are disclosed in the Corporate Governance Report.
had submitted its detailed response. After considering the
Bank’s submission, the RBI imposed a penalty of ` 2 crore on Particulars of Employees
the Bank vide its letter dated July 19, 2016 on account of The information in terms of Rule 5 of the Companies (Appointment
pendency in receipt of bill of entry relating to advance import and Remuneration of Managerial Personnel) Rules, 2014 is given
remittances made and lapses in adhering to KYC/AML in ANNEXURE 6 and ANNEXURE 7 to this report.
guidelines in this respect. The penalty has since been paid.
The Bank has implemented a comprehensive corrective action Conservation of Energy, Technology Absorption, Foreign
plan, to strengthen its internal control mechanisms so as to Exchange Earnings and Outgo
ensure that such incidents do not recur.
(A) Conservation of Energy
Directors and Key Managerial Personnel
Your Bank has undertaken several initiatives in this area such as
The Bank proposes to re-appoint Mr. Paresh Sukthankar and Mr.
← )NSTALLATION OF GREEN LOCKS ANDN !#
Kaizad Bharucha as Deputy Managing Director and Executive
CONTROLLERSO IN AIRI conditioning machines in order to
Director of the Bank, respectively, for a period of three years each save energy and support go-green initiative
with effect from June 13, 2017, subject to the approval of the
Reserve Bank of India and the shareholders at the ensuing Annual ← )NSTALLATION OF ENERGY CAPACITORS AT HIGH CONSUMPTIONMOFlCES

General Meeting. In compliance with Section 152 of the to control the power factor and to reduce energy consumption

Companies Act, 2013, Mr. Sukthankar and Mr. Bharucha will also
← !LLLMAIN SIGNBOARDSSIN BRANCHES SWITCHEDCOFFEPOST FP
retire by rotation at the ensuing Annual General Meeting and are
eligible for re-appointment. The Bank also proposes to re-appoint
Mrs. Shyamala Gopinath at the ensuing Annual General Meeting
as the Part Time Non-Executive Chairperson of the Bank for

HDFC Bank Limited Annual Report 2016-17


← M ←

← 0UTUCONTROLS ON USAGEAOF LIFTS


!#S
COMMON PASSAGESLIGHTS and other electrical
equipment

33
Directors' Report

(B) Technology Absorption Business Responsibility Report

Your Bank has been at the forefront of using technology The Bank’s Business Responsibility Report containing a report
absorption and evaluates innovative technology with on its Corporate Social Responsibility Activities and Initiatives
multiple fintech partners. In the year under review, it in the format adopted by companies in India as per the
organised its 2nd ‘Digital Innovation Summit’ and shortlisted guidelines of the Securities and Exchange Board of India in this
several fintech startups to carry out multiple proof of regard is available on its web site www.hdfcbank.com
concepts in both customer facing and internal processes.
Information under the Sexual Harassment of Women at
Your Bank uses advanced analytics to create a 360 degree Workplace (Prevention, Prohibition and Redressal) Act,
view of all 4.05 crore customers. The analytics engine uses 2013
machine learning to analyze structured and unstructured
The relevant information is included in Section E-Principle 3 of
data which help in offering relevant product/ service
the Business Responsibility Report for 2016-17.
recommendations using advanced algorithms. These are
delivered via personalized campaigns through an omni- Acknowledgement
channel approach. Your Bank has also begun using
robotics and artificial intelligence in digital commerce, Your Directors would like to place on record their gratitude for
corporate supply chain and payment settlement systems to all the guidance and co-operation received from the Reserve
reduce time to market and turnaround time. Bank of India and other government and regulatory agencies.
Your Directors would also like to take this opportunity to
← Foreign Exchange Earnings and Outgo express their appreciation for the hard work and dedicated
efforts put in by the Bank’s employees and look forward to their
During the year, the total foreign exchange earned by the
continued contribution in building a ‘World Class Indian Bank.’
Bank was ` 1,263.4 crore (on account of net gains arising
on all exchange/derivative transactions) and the total Conclusion
foreign exchange outgo was about ` 221 crore towards the
operating and capital expenditure requirements. The global economy is facing risks emanating from policy
uncertainty in the US, imminent elections in several European
Secretarial Audit countries and rising protectionism. The Indian economy seems
In terms of Section 204 of the Companies Act, 2013 and the Rules better placed. And so is your Bank which is on course to continue
made thereunder, M/s. BNP & Associates, Practising Company to outgrow the system, as it has in the year under review.
Secretaries have been appointed as Secretarial Auditors of the
Like in the past, the Bank will continue to leverage its
Bank for the financial year 2016-17. The report of the Secretarial distribution strength and digital platforms especially in the rural
Auditors is enclosed as ANNEXURE 8 to this Report. The and semi-urban parts of the country for sustainable growth.
observations in the said report are self-explanatory and no further
comments/explanations are called for. Needless to say, the Bank will continue to focus on its 5 core
values namely Customer Focus, Operational Excellence,
Corporate Governance Product Leadership, People and Sustainability. Its commitment
to the highest possible standards of corporate governance
In compliance with Regulation 34 and other applicable
remains unwavering. All of this will help the Bank on its onward
provisions of the Securities and Exchange Board of India
growth journey and help create long-term shareholder value.
(Listing Obligations and Disclosure Requirements)
Regulations, 2015, a separate report on Corporate On behalf of the Board of Directors
Governance along with a certificate of compliance from the
Secretarial Auditors, forms an integral part of this Report. Mrs. Shyamala Gopinath
Chairperson

Mumbai, May 29, 2017

HDFC Bank Limited Annual Report 2016-17 34


Directors' Report

ANNEXURE 1 to the Directors’ Report

The ESOP Schemes of the Bank are in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 (“the Regulations”)
and the details as per the Regulations are as under:

EMPLOYEES’ STOCK OPTIONS AS ON MARCH 31, 2017


Plan/ Schemes Date of Total No. Grant Number Number Options Number Number Number Number of

Shareholders’ of Options Price of Options of Options Vested of Options of Options of Options Options in
Approval Approved (`) Outstanding at Granted / Exercised & Forfeited Lapsed Force at the
the beginning Options Shares Allotted during the during the end of the
of the year Re-instated during the year year year year

Plan E- ESOS XVI 30th June, 2010 100,000,000 440.16 1,674,000 - - 1,674,000 - - -

Plan E- ESOS XVII 30th June, 2010 100,000,000 508.23 111,600 - - 111,600 - - -

Plan E- ESOS XVIII 30th June, 2010 100,000,000 468.40 12,552,500 - - 10,413,000 - 100 2,139,400

Plan E- ESOS XIX 30th June, 2010 100,000,000 680.00 23,512,100 - 8,878,500 10,449,800 86,100 21,000 12,955,200

Plan D- ESOS XX 16th June, 2007 75,000,000 680.00 5,133,900 - 1,835,400 1,748,800 30,000 20,800 3,334,300

Plan C- ESOS XXI 17th June, 2005 50,000,000 680.00 5,260,800 - 1,719,300 942,400 - - 4,318,400

Plan E- ESOS XXII 30th June, 2010 100,000,000 664.45 - - - - - - -

Plan C- ESOS XXIII 17th June, 2005 50,000,000 835.50 480,000 - 142,200 122,600 24,000 7,400 326,000

Plan F- ESOS XXIV 27th June, 2013 100,000,000 835.50 36,442,200 - 11,282,900 7,059,900 651,400 59,000 28,671,900

Plan F- ESOS XXV 27th June, 2013 100,000,000 1092.65 43,484,200 - 17,291,600 1,837,100 1,201,000 38,000 40,408,100

Plan F- ESOS XXVI 27th June, 2013 100,000,000 1097.80 3,000 - 1,200 - - - 3,000

Total - - - 128,654,300 - 411,51,100 343,59,200 1,992,500 146,300 92,156,300

Options Exercised during the aforesaid period 34,359,200


Share Capital Money received during the above period (`) 68,718,400

Share Premium Money received during the above period (`) 22,546,443,173

Perquisite Tax Amount collected during the aforesaid period (`) 7,074,356,786

Total Amount collected during the aforesaid period (`) 29,689,518,359

Note:

←One (1) share of the face value of ` 2/- each would arise on exercise of One (1) Equity Stock Option.
←No Stock Options were granted during the year 2016-17.

HDFC Bank Limited Annual Report 2016-17 35


Directors' Report

Vesting Requirements Except for the death / permanent disablement or retirement of the employee, the options will vest only
if the employee is in the continuous employment of the Bank as on the date of vesting
Maximum Term of Options Provided the employee is in the continuous employment of the Bank, the options vested will lapse

in case the same are not exercised by the employee within 4 years from the date of vesting. Except
in the case of death/ permanent disablement or retirement of the employee, all unvested options get
forfeited on the employee’s last working date in the Bank.
Source of shares Primary

Variation in terms of ESOS Nil

Diluted Earnings Per Share (EPS) pursuant to the issue of shares The diluted EPS of the Bank calculated after considering the
on exercise of option calculated in accordance with Accounting effect of potential equity shares arising on account of exercise
Standard (AS) - 20 (Earnings Per Share) of options is ` 56.4

Where the company has calculated the employee compensation Had the Bank followed fair value method for accounting, the
cost using the intrinsic value of the stock options, the difference stock option compensation expense would have been higher
between the employee compensation cost so computed and the by ` 812.7 crore. Consequently profit after tax would have been
employee compensation cost that shall have been recognized lower by ` 812.7 crore and the basic EPS of the Bank would
if it had used the fair value of the options, shall be disclosed. have been ` 54.0 per share (lower by ` 3.2 per share) and the
The impact of this difference on profits and on EPS of the company diluted EPS would have been `53.3 per share (lower by ` 3.2
shall also be disclosed per share)

Weighted average exercise prices and weighted average fair The weighted average price of the stock options exercised is
values of options shall be disclosed separately for options whose `658.2 and the weighted average fair value is `235.3
exercise price either equals or exceeds or is less than the market
price of the stock options

Method used and assumptions made to incorporate effects of The exercise multiple, which is based on historical data of early
expected early exercise option exercise decisions of the employees, incorporates early
exercise price effect in the valuation of ESOPs. The exercise
multiple indicates that option holders tend to exercise their
options when the share price reaches a particular multiple of
the exercise price.

How expected volatility was determined, including explanation Stock expected volatility is completely based on GARCH
of the extent to which expected volatility was based on historical volatility forecasting model using historical stock prices from
volatility the market.

Whether and how any other features of the option grant were Stock price and risk free interest rate are variables based on
incorporated into the measurement of fair value, such as a market actual market data at the time of ESOP valuation.
condition

HDFC Bank Limited Annual Report 2016-17 36


Directors' Report

ANNEXURE 2 to the Directors’ Report

HDFC Bank Annual CSR Report 2016–2017

← Brief outline of the CSR Policy

HDFC Bank, has worked towards the vision of “Creating Sustainable Communities” through its CSR Programmes. In line with
the requirements of Section 135 of the Companies Act, the Bank has instituted the CSR Policy, duly approved by the Board.
HDFC Bank’s CSR policy outlines the Bank’s mission to contribute to social and economic development of the communities at
large. During the financial year 2016-17, the Bank has undertaken CSR Programmes aligned to the CSR Policy in the below
focus areas -

← Promoting Education

← Skill Training and Livelihood Enhancement

← Health Care

← Environmental Sustainability

← Eradicating Poverty

← Rural Development

The Bank’s CSR Policy can be found on the corporate Website at http://www.hdfcbank.com/assets/pdf/CSR_Policy.pdf

2. Composition of CSR Committee

The Bank has also constituted a Board-level CSR Committee to govern the implementation of the policy. The composition of the
Committee is as follows:

ss -S
2ENUU+ARNADA

← -R
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← -R
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← -R
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← Average net profit of the company for last three financial

years INR 15,200 CR

← Prescribed CSR Expenditure (two percent of the amount as in item 4

above) INR 304 CR

← Details of CSR spent during the financial year

← 4OTAL AMOUNTASPENTUDURINGNTHE lNANCIAL YEARA ).2 .ᄃ


ᄉ #2

ss !MOUNT UNSPENT
UIF ANY ).2).#2

HDFC Bank Limited Annual Report 2016-17 37


Directors' Report

ss 4HEHMANNER INNWHICHRTHEIAMOUNT ISISPENT DURINGNTHE lNANCIAL YEARAIS DETAILEDDBELOW

Sr. CSR project / Sector Projects or Amount outlay Amount spent Cumulative Amount spent:
no Activity (Schedule VII) programs (project-wise) (INR Cr) expenditure Direct or through
1. Local area or (INR Cr) 1.Direct up to reporting *implementing
others expenditure period (INR Cr)* agency (INR Cr)
2. State and district 2.Overheads
1 Promoting Education Promotion of Education Pan India 25.48 1. 7.10 58.63 Implementing
2. 0.37 Agency - 18.01
2 Skill Training and Livelihood Skill development and Pan India 30.41 1. 18.03 60.93 Implementing
Enhancement Vocational Training 2. 0.37 Agency - 12.01
3 Health Care Preventive and Curative Pan India 23.56 1. 23.19 39.10 Direct
Healthcare 2. 0.37
4 Environmental Sustainability Environment Pan India 1.01 1. 1.01 2.68 Direct
2. 0.00
5 Eradicating Poverty Eradicating poverty Pan India 4.46 1. 0.00 6.82 Implementing
2. 0.00 Agency - 4.46
6 Rural Development Rural Development Pan India 220.50 1. 126.71 441.95 Implementing
Projects 2. 0.37 Agency - 93.42
*Details of the implementing agencies are listed below:
Promotion of Education "ODH 3HIKSHAK 3AMITI
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T &RIENDSN 5NIONI FOR %NERGIZING ,IVES
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.ISVARTHAH&OUNDATION
0RATHAMH%DUCATIONA&OUNDATION
3OCIETYIFORR !CTION IN #OMMUNITYI(EALTH
L3RII!UROBINDO 3OCIETY
3RII3ATHYA 3AI 4RUST
4EACH 4O ,EAD
A9UVA 5NSTOPPABLE Rural Development :
!CTION &OR &OODO0RODUCTION
C!GAG+HAN 2URAL 3UPPORTT0ROGRAMME )NDIA
!ROH &OUNDATION
!SHWAMEGHE'RAMIN 0ANLOTL+SHETRAA Vikas Va Shaikshanik Sanstha, BAIF Development Research Foundation, Community Advancement & Rural
Development 3OCIETY
&8"8)NDIAD3URAKSHA
'RAM 5NNATI &OUNDATION
(ITESHIE3AMAJA3EVA 3ANSTHA
)NTEGRATED $EVELOPMENT &OUNDATION
+'6+
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.AV "HARAT *AGRITIT+ENDRA
.AVRACHNAH-AHILA 6IKASK4RUST
0ARTICIPATORYY Action for Community Empowerment, Peoples Action for National Integration, Professional Assistance for Development Action,
3AHBAGIB3HIKSHAN +ENDRA
3ANJEEVANIN)NSTITUTEIFOR %MPOWERMENT $EVELOPMENT
M3HAREA3OCIETYITO (EAL !IDI2ESTORET%DUCATE
Shikhar Yuva Manch, Shramik Bharti, Society for Action in Community Health, Vikalp, Watershed Organisation Trust, Yuva Rural
!SSOCIATION
!GRASAR
9UVA 5NSTOPPABLE
3HAKTISHALII-AHILA 3ANGTHAN 3AMITI
I6OLUNTARYY!SSOCIATIONIFOR 0EOPLEP3ERVICE
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3!+3() Skills Training & Livelihood Enhancement !ROH &OUNDATION
$R --,,$HAWALEL-EMORIALA4RUST
&RIENDSN5NION FOR %NERGIZING Lives, FXB India Suraksha, Indo Global Social Service Society, Navrachna MahilaVikas Trust, Pune City
Connect Development &OUNDATION
T3AMVEDNAN$EVELOPMENT 3OCIETY
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3)&%&)NDIA
4ATA )NSTITUTEIOF 3OCIALI3CIENCES
4HEH,EPROSYR -ISSIONS4RUSTS )NDIA
6OLUNTARYY !SSOCIATIONI FOR 0EOPLEP 3ERVICE Other Donations under different projects "HAJANDASA "AJAJJ Foundation, Chetana
Foundation, GiveIndia, Helpage India, Commissioner of Municipal Administration

← In case company has failed to spend the two percent of the average net profit for the last three financial years or any
part thereof, the reasons for not spending the amount.
NA
← A responsibility statement of CSR committee:
/URU#323ACTIVITIES ARERGUIDED BY THEHVISION ANDNOBJECTIVES AS PROVIDEDDIN OURU#3230OLICY
7E HAVEEALSO PUTUIN PLACEAAAROBUSTS monitoring and reporting mechanism to ensure effective implementation of
our CSR activities, in line with the requirements of Companies Act 2013.
!!DETAILED DESCRIPTION OFOOUR CURRENTOPROJECTS ISRINCLUDED INPTHEH$IRECTORS
REPORT
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2ENUU+ARNAD
Managing Director Chairperson, CSR Committee
Date: April 13, 2017

HDFC Bank Limited Annual Report 2016-17 38


Directors' Report

ANNEXURE 3 to the Directors’ Report


Form No. MGT-9
Extract of the Annual Return as on the financial year ended March 31, 2017
[Pursuant to section 92(3) of the Companies Act, 2013 and Rule 12(1) of the
Companies (Management and Administration) Rules, 2014]

← REGISTRATION AND OTHER DETAILS:

← CIN: L65920MH1994PLC080618

← Registration Date: August 30, 1994

← Name of the Company: HDFC Bank Limited

← Category / Sub-category of the Company: Company limited by shares / Indian Non-Government Company

← Address of the Registered office and contact details:

HDFC Bank Limited


HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013. Tel: 022 2498 8484

← Whether listed: Yes

← Name, Address and contact details of Registrar and Transfer Agent:

Datamatics Financial Services Limited


Plot no. B 5, Part B, Cross Lane, MIDC, Marol, Andheri East, Mumbai - 400 093
Tel: 022-66712213/14, Email: hdinvestors@dfssl.com
← PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY:

All the business activities contributing 10 per cent or more of the total turnover of the Company shall be stated:
Name and Description of the main products / services NIC Code Per cent to Total Turnover of the Bank

Banking and Financial Services 64191 100 per cent

III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES:

Sr. Name and Address of the Company CIN/ GLN Holding / Subsidiary Percentage of Applicable section
no. / Associate shares held
1 HDB Financial Services Limited 5 ᄃ'*0,#ᄃ Subsidiary 96.20 Sec 2(87) of
Radhika, 2nd Floor, Law Garden Road, Companies Act,
Navrangpura, Ahmedabad - 380 009. 2013
2 HDFC Securities Limited 5-(0,#ᄃ Subsidiary 97.91 Sec 2(87) of
I Think, Techno Campus, Building-B, Companies Act,
“Alpha” office, 8th Floor, opposite 2013
#ROMPTON 'REAVES+ANJURMARG %AST
Mumbai - 400 042.
3 International Asset Reconstruction 5 ᄉ$,04#ᄃ Associate 29.41 Sec 2(6) of
Company Private Limited Companies Act,
709, 7th Floor, Ansal Bhavan, 2013
+ASTURBA 'ANDHIR-ARG
New Delhi - 110 001

Note: Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited ceased to be associates of
the Bank consequent to their amalgamation with HDB Financial Services Limited, with effect from December 1, 2016.

HDFC Bank Limited Annual Report 2016-17 39


Directors' Report

IV. SHAREHOLDING PATTERN: (EQUITY SHARE CAPITAL BREAKUP AS PERCENTAGE OF TOTAL EQUITY)
(i) Category-wise Share Holding
Category Category of shareholder No. of Shares held at the beginning of the year No. of Shares held at the end of the year Percentage
code
Change during
(I) (II) Demat Physical Total Percentage of Demat Physical Total
Percentage of
the year
total shares total shares
(A) Promoters
1 Indian
(a) Individuals/HUF 0 0 0 0.00 0 0 0 0.00 0.00
(b) Central Government 0 0 0 0.00 0 0 0 0.00 0.00
(c) State Government(s) 0 0 0 0.00 0 0 0 0.00 0.00
(d) Bodies Corporate (#) 543,216,100 0 543,216,100 21.49 543,216,100 0 543,216,100 21.20 (0.29)
(e) Banks / FI 0 0 0 0.00 0 0 0 0.00 0.00
(f) Any Other (specify) 0 0 0 0.00 0 0 0 0.00 0.00
Sub Total (A)(1) 543,216,100 0 543,216,100 21.49 543,216,100 0 543,216,100 21.20 (0.29)
2 Foreign
(a) NRIs - Individuals 0 0 0 0.00 0 0 0 0.00 0.00
(b) Other - Individuals 0 0 0 0.00 0 0 0 0.00 0.00
(c) Bodies Corporate 0 0 0 0.00 0 0 0 0.00 0.00
(d) Banks / FI 0 0 0 0.00 0 0 0 0.00 0.00
(e) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0.00
Investor
(f) Any Other (specify) 0 0 0 0.00 0 0 0 0.00 0.00
Sub Total (A)(2) 0 0 0 0.00 0 0 0 0.00 0.00
Total Shareholding of 543,216,100 0 543,216,100 21.49 543,216,100 0 543,216,100 21.20 (0.29)
Promoter and Promoter
Group (A)=(A)(1)+(A)(2)
(B) Public shareholding
1 Institutions
(a) Mutual Funds 211,659,875 33,185 211,693,060 8.37 206,150,669 33,185 206,183,854 8.05 (0.33)
(b) Banks / FI 2,822,510 17,390 2,839,900 0.11 2,308,514 17,390 2,325,904 0.09 (0.02)
(c) Central Government 2,676,950 0 2,676,950 0.11 2,767,437 0 2,767,437 0.11 0.00
(d) State Government(s) 0 0 0 0.00 0 0 0 0.00 0.00
(e) Venture Capital Funds 0 0 0 0.00 0 0 0 0.00 0.00
(f) Insurance Companies 68,146,983 0 68,146,983 2.70 61,511,040 0 61,511,040 2.40 (0.30)
(g) FIIs 814,448,518 15,170 814,463,688 32.22 880,321,745 15,170 880,336,915 34.35 2.14
(h) Foreign Venture Capital 0 0 0 0.00 0 0 0 0.00 0.00
Funds
(i) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0.00
Investor
(j) Alternate Investment 0 0 0 0.00 313,796 0 313,796 0.01 0.01
Funds
(k) Other (specify) 0 0 0 0.00 0 0 0 0.00 0.00
Sub Total (B)(1) 1,099,754,836 65,745 1,099,820,581 43.50 1,153,373,201 65,745 1,153,438,946 45.01 1.51

HDFC Bank Limited Annual Report 2016-17 40


Directors' Report

Category Category of shareholder No. of Shares held at the beginning of the year No. of Shares held at the end of the year Percentage
code
Change during
(I) (II) Demat Physical Total Percentage of Demat Physical Total Percentage of the year
total shares total shares
2 Non-institutions
(a) Bodies Corporate 0 0 0 0.00 0 0 0 0.00 0.00
(a)(i) Indian 185,438,125 183,245 185,621,370 7.34 165,798,090 181,005 165,979,095 6.48 (0.86)
(a)(ii) Overseas 1,248 10,075 11,323 0.00 1,248 10,075 11,323 0.00 0.00
(b) Individuals 0 0 0 0.00 0 0 0 0.00 0.00
(b)(i) Individual shareholders 146,520,140 17,200,720 163,720,860 6.48 147,394,271 16,210,855 163,605,126 6.38 (0.09)
holding nominal share
capital up to ` 1 Lakh
(b)(ii) Individual shareholders 55,330,724 191,000 55,521,724 2.20 56,969,465 191,000 57,160,465 2.23 0.03
holding nominal share
capital in excess of
` 1 Lakh
(c) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0.00
Investor
(d) Other (specify) 0 0 0 0.00 0 0 0 0.00 0.00
d-i NRI Rep 2,360,398 41,720 2,402,118 0.10 2,308,878 41,295 2,350,173 0.09 0.00
d-ii NRI Non -Rept 4,833,762 2,765 4,836,527 0.19 3,756,747 2,265 3,759,012 0.15 (0.04)
d-iii Foreign Bodies 31,000 0 31,000 0.00 21,000 0 21,000 0.00 0.00
d-iv Foreign National 1,505 0 1,505 0.00 1,068 0 1,068 0.00 0.00
Sub Total (B)(2) 394,516,902 17,629,525 412,146,427 16.30 376,250,767 16,636,495 392,887,262 15.33 (0.97)
Total Public 1,494,271,738 17,695,270 1,511,967,008 59.80 1,529,623,968 16,702,240 1,546,326,208 60.34 0.54
Shareholding (B) = (B)
(1)+(B)(2)
Total (A+B) 2,037,487,838 17,695,270 2,055,183,108 81.29 2,072,840,068 16,702,240 2,089,542,308 81.54 0.25
(C) Custodians for GDRs 473,003,409 0 473,003,409 18.71 473,003,409 0 473,003,409 18.46 (0.25)
and ADRs
GRAND TOTAL 2,510,491,247 17,695,270 2,528,186,517 100.00 2,545,843,477 16,702,240 2,562,545,717 100.00 0.00
(A)+(B)+(C)
# Promoters are Indian Companies incorporated under the Indian Companies Act 1956 and are controlled by Indian management. Foreign
shareholding in the principal promoter company exceeds 51 per cent of their paid up share capital and accordingly the shareholding of the
company in the Bank may be deemed as indirect foreign shareholding in terms of the extant FDI Policy. The Bank has made a
representation to the Ministry of Finance stating that the shareholding of the Indian Promoters should not be treated as foreign
shareholding. Confirmation is awaited from the Ministry of Finance in this regard.
← Shareholding of Promoters
Sr. Shareholder’s Name Shareholding at the beginning of the year Shareholding at the end of the year
Percentage
No. change in
No.of Percentage Percentage of No.of Percentage of Percentage of shareholding
Shares of total Shares Shares total Shares during the
Shares of the Pledged / Shares of the Pledged / year**
company encumbered to company encumbered to
total shares total shares
1 Housing Development Finance 393,211,100 15.55 0 393,211,100 15.35 0 0
Corporation Ltd
2 HDFC Investments Ltd 150,000,000 5.93 0 150,000,000 5.85 0 0
3 HDFC Holdings Ltd 5,000 0 0 5,000 0 0 0
Total 543,216,100 21.49 0 543,216,100 21.20 0 0

HDFC Bank Limited Annual Report 2016-17 41


Directors' Report

(iii) Change in Promoters’ Shareholding:


Shareholder’s Name Shareholding at the beginning of the year Cumulative Shareholding during the year

No. of shares Percentage of total Shares No.of Shares Percentage of total Shares
of the company of the company
At the beginning of the year 543,216,100 21.49

Date wise Increase / Decrease in Promoters


shareholding during the year specifying the reasons
for increase/ decrease (e.g. allotment / transfer /
bonus / sweat / equity etc.) **
At the end of the year 543,216,100 21.20 (**)

← During the year under review, there is no change with respect to the shares held by the promoters. However, there is a change in the
percentage to capital because of issuance and allotment of additional equity shares by the Bank upon exercise of equity stock options
by the employees during the FY 2016-17.

← Shareholding Pattern of top ten shareholders (other than directors, promoters and holders of GDRs and ADRs):
Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding
No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
1 EUROPACIFIC GROWTH FUND At the beginning of the Year 31-MAR-2016 98,038,464 3.88
Increase 29-APR-2016 8,257 0.00 98,046,721 3.88
Increase 06-MAY-2016 370,190 0.02 98,416,911 3.89
Increase 03-JUN-2016 789,848 0.03 99,206,759 3.92
Increase 13-JAN-2017 1,105,000 0.04 100,311,759 3.93
At the END of the Year 31-MAR-2017 100,311,759 3.92
2 LIFE INSURANCE CORPORATION At the beginning of the Year 31-MAR-2016 61,303,525 2.43
OF INDIA Decrease 27-MAY-2016 (5,000) 0.00 61,298,525 2.42
Decrease 03-JUN-2016 (2,612,303) (0.10) 58,686,222 2.32
Decrease 10-JUN-2016 (2,282,968) (0.09) 56,403,254 2.23
Decrease 17-JUN-2016 (880,816) (0.04) 55,522,438 2.19
Decrease 24-JUN-2016 (480,363) (0.02) 55,042,075 2.17
Decrease 30-JUN-2016 (50,000) 0.00 54,992,075 2.17
Decrease 08-JUL-2016 (370,825) (0.02) 54,621,250 2.16
Decrease 14-JUL-2016 (1,375,005) (0.05) 53,246,245 2.10
Decrease 15-JUL-2016 (460,000) (0.02) 52,786,245 2.08
Decrease 26-AUG-2016 (516,330) (0.02) 52,269,915 2.06
Decrease 02-SEP-2016 (509,927) (0.02) 51,759,988 2.04
Decrease 09-SEP-2016 (104,221) 0.00 51,655,767 2.03
Decrease 16-SEP-2016 (36,000) 0.00 51,619,767 2.03
Decrease 23-SEP-2016 (453,600) (0.02) 51,166,167 2.01
Decrease 30-SEP-2016 (234,356) (0.01) 50,931,811 2.00
Decrease 07-OCT-2016 (20,000) 0.00 50,911,811 2.00
Increase 28-OCT-2016 46,855 0.00 50,958,666 2.00

HDFC Bank Limited Annual Report 2016-17 42


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Increase 04-NOV-2016 1,388,247 0.05 52,346,913 2.05
Increase 11-NOV-2016 2,110,648 0.08 54,457,561 2.14
Increase 18-NOV-2016 454,250 0.02 54,911,811 2.15
Increase 30-DEC-2016 596,695 0.02 55,508,506 2.17
Increase 06-JAN-2017 923,327 0.04 56,431,833 2.21
Increase 13-JAN-2017 627,943 0.03 57,059,776 2.23
Decrease 17-FEB-2017 (7,775) 0.00 57,052,001 2.23
Decrease 24-FEB-2017 (1,000) 0.00 57,051,001 2.23
Decrease 03-MAR-2017 (42,000) 0.00 57,009,001 2.23
Decrease 10-MAR-2017 (383,600) (0.02) 56,625,401 2.21
Decrease 17-MAR-2017 (560,412) (0.02) 56,064,989 2.19
Decrease 24-MAR-2017 (551,014) (0.02) 55,513,975 2.17
Decrease 31-MAR-2017 (56,160) 0.00 55,457,815 2.16
At the END of the Year 31-MAR-2017 55,457,815 2.16
3 CAPITAL WORLD GROWTH AND At the beginning of the Year 31-MAR-2016 36,585,126 1.45
INCOME FUND Increase 09-DEC-2016 499,000 0.02 37,084,126 1.45
Increase 24-FEB-2017 336,620 0.01 37,420,746 1.46
Increase 03-MAR-2017 215,864 0.01 37,636,610 1.47
At the END of the Year 31-MAR-2017 37,636,610 1.47
4 ICICI PRUDENTIAL LIFE At the beginning of the Year 31-MAR-2016 41,523,802 1.64
INSURANCE COMPANY LIMITED Decrease 08-APR-2016 (119,872) (0.01) 41,403,930 1.64
Increase 15-APR-2016 90,888 0.00 41,494,818 1.64
Increase 22-APR-2016 21,800 0.00 41,516,618 1.64
Increase 29-APR-2016 238,410 0.01 41,755,028 1.65
Decrease 06-MAY-2016 (143,296) (0.01) 41,611,732 1.65
Decrease 13-MAY-2016 (172,416) (0.01) 41,439,316 1.64
Decrease 20-MAY-2016 (127,732) (0.01) 41,311,584 1.63
Decrease 27-MAY-2016 (510,048) (0.02) 40,801,536 1.61
Decrease 03-JUN-2016 (28,822) 0.00 40,772,714 1.61
Increase 10-JUN-2016 206,566 0.01 40,979,280 1.62
Decrease 17-JUN-2016 (18,843) 0.00 40,960,437 1.62
Increase 24-JUN-2016 29,954 0.00 40,990,391 1.62
Decrease 30-JUN-2016 (859,052) (0.03) 40,131,339 1.58
Decrease 01-JUL-2016 (2,100) 0.00 40,129,239 1.58
Increase 08-JUL-2016 819,945 0.03 40,949,184 1.62
Decrease 14-JUL-2016 (141,613) (0.01) 40,807,571 1.61
Decrease 15-JUL-2016 (30,677) 0.00 40,776,894 1.61
Decrease 22-JUL-2016 (291,424) (0.01) 40,485,470 1.60
Decrease 29-JUL-2016 (66,419) 0.00 40,419,051 1.59
Decrease 05-AUG-2016 (100,763) 0.00 40,318,288 1.59
Increase 12-AUG-2016 332,202 0.01 40,650,490 1.60
Decrease 19-AUG-2016 (46,444) 0.00 40,604,046 1.60

HDFC Bank Limited Annual Report 2016-17 43


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Decrease 26-AUG-2016 (1,249,468) (0.05) 39,354,578 1.55
Increase 02-SEP-2016 166,966 0.01 39,521,544 1.56
Increase 09-SEP-2016 270,918 0.01 39,792,462 1.57
Decrease 16-SEP-2016 (455,385) (0.02) 39,337,077 1.55
Decrease 23-SEP-2016 (606,008) (0.02) 38,731,069 1.52
Decrease 30-SEP-2016 (82,983) 0.00 38,648,086 1.52
Increase 07-OCT-2016 12,018 0.00 38,660,104 1.52
Increase 14-OCT-2016 306,875 0.01 38,966,979 1.53
Increase 21-OCT-2016 567,503 0.02 39,534,482 1.55
Increase 28-OCT-2016 180 0.00 39,534,662 1.55
Increase 04-NOV-2016 84,161 0.00 39,618,823 1.55
Decrease 11-NOV-2016 (817,487) (0.03) 38,801,336 1.52
Decrease 18-NOV-2016 (252,113) (0.01) 38,549,223 1.51
Increase 25-NOV-2016 293,609 0.01 38,842,832 1.52
Increase 02-DEC-2016 45,996 0.00 38,888,828 1.52
Decrease 09-DEC-2016 (1,821) 0.00 38,887,007 1.52
Decrease 16-DEC-2016 (43,019) 0.00 38,843,988 1.52
Decrease 23-DEC-2016 (11,103) 0.00 38,832,885 1.52
Increase 30-DEC-2016 90,350 0.00 38,923,235 1.52
Decrease 06-JAN-2017 (584,328) (0.02) 38,338,907 1.50
Decrease 13-JAN-2017 (138,675) (0.01) 38,200,232 1.50
Decrease 20-JAN-2017 (653,020) (0.03) 37,547,212 1.47
Decrease 27-JAN-2017 (625,450) (0.02) 36,921,762 1.45
Increase 03-FEB-2017 275,392 0.01 37,197,154 1.45
Increase 10-FEB-2017 194,701 0.01 37,391,855 1.46
Increase 17-FEB-2017 153,125 0.01 37,544,980 1.47
Decrease 24-FEB-2017 (1,494,486) (0.06) 36,050,494 1.41
Increase 03-MAR-2017 133,629 0.01 36,184,123 1.41
Increase 10-MAR-2017 15,775 0.00 36,199,898 1.41
Decrease 17-MAR-2017 (240,824) (0.01) 35,959,074 1.41
Increase 24-MAR-2017 138,824 0.01 36,097,898 1.41
Decrease 31-MAR-2017 (233,106) (0.01) 35,864,792 1.40
At the END of the Year 31-MAR-2017 35,864,792 1.40
5 SBI-ETF NIFTY 50 At the beginning of the Year 31-MAR-2016 21,028,634 0.83
Increase 08-APR-2016 211,633 0.01 21,240,267 0.84
Increase 15-APR-2016 242,220 0.01 21,482,487 0.85
Increase 22-APR-2016 28,876 0.00 21,511,363 0.85
Increase 29-APR-2016 205,474 0.01 21,716,837 0.86
Increase 06-MAY-2016 281,396 0.01 21,998,233 0.87
Increase 13-MAY-2016 7,903 0.00 22,006,136 0.87
Increase 20-MAY-2016 488,992 0.02 22,495,128 0.89
Increase 27-MAY-2016 169,314 0.01 22,664,442 0.90

HDFC Bank Limited Annual Report 2016-17 44


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Decrease 03-JUN-2016 (182,651) (0.01) 22,481,791 0.89
Decrease 10-JUN-2016 (8,956) 0.00 22,472,835 0.89
Increase 17-JUN-2016 9,456 0.00 22,482,291 0.89
Increase 24-JUN-2016 225,573 0.01 22,707,864 0.90
Decrease 30-JUN-2016 (116,294) (0.01) 22,591,570 0.89
Decrease 01-JUL-2016 (217,366) (0.01) 22,374,204 0.88
Increase 08-JUL-2016 7,047 0.00 22,381,251 0.88
Increase 14-JUL-2016 155,816 0.01 22,537,067 0.89
Increase 15-JUL-2016 443 0.00 22,537,510 0.89
Increase 22-JUL-2016 86,694 0.00 22,624,204 0.89
Decrease 29-JUL-2016 (269,570) (0.01) 22,354,634 0.88
Increase 05-AUG-2016 486,892 0.02 22,841,526 0.90
Decrease 12-AUG-2016 (5,489) 0.00 22,836,037 0.90
Increase 19-AUG-2016 129,450 0.01 22,965,487 0.91
Increase 26-AUG-2016 338,444 0.01 23,303,931 0.92
Increase 02-SEP-2016 1,788,415 0.07 25,092,346 0.99
Increase 09-SEP-2016 992,506 0.04 26,084,852 1.03
Increase 16-SEP-2016 221,590 0.01 26,306,442 1.04
Increase 23-SEP-2016 235,147 0.01 26,541,589 1.04
Increase 30-SEP-2016 656,519 0.03 27,198,108 1.07
Increase 07-OCT-2016 478,658 0.02 27,676,766 1.09
Decrease 14-OCT-2016 (748,280) (0.03) 26,928,486 1.06
Increase 21-OCT-2016 260,328 0.01 27,188,814 1.07
Increase 28-OCT-2016 140,057 0.01 27,328,871 1.07
Increase 04-NOV-2016 217,199 0.01 27,546,070 1.08
Increase 11-NOV-2016 310,428 0.01 27,856,498 1.09
Increase 18-NOV-2016 567,176 0.02 28,423,674 1.12
Decrease 25-NOV-2016 (815,434) (0.03) 27,608,240 1.08
Increase 02-DEC-2016 747,891 0.03 28,356,131 1.11
Increase 09-DEC-2016 173,896 0.01 28,530,027 1.12
Increase 16-DEC-2016 665,065 0.03 29,195,092 1.14
Increase 23-DEC-2016 628,940 0.03 29,824,032 1.17
Increase 30-DEC-2016 552,115 0.02 30,376,147 1.19
Increase 06-JAN-2017 727,054 0.03 31,103,201 1.22
Increase 13-JAN-2017 229,910 0.01 31,333,111 1.23
Increase 20-JAN-2017 119,075 0.01 31,452,186 1.23
Increase 27-JAN-2017 144,954 0.01 31,597,140 1.24
Increase 03-FEB-2017 507,978 0.02 32,105,118 1.26
Increase 10-FEB-2017 319,845 0.01 32,424,963 1.27
Increase 17-FEB-2017 92,124 0.00 32,517,087 1.27
Decrease 24-FEB-2017 (2,647,573) (0.10) 29,869,514 1.17
Increase 03-MAR-2017 135,299 0.01 30,004,813 1.17
Increase 10-MAR-2017 345,751 0.01 30,350,564 1.19

HDFC Bank Limited Annual Report 2016-17 45


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Increase 17-MAR-2017 103,860 0.00 3,045,4424 1.19
Decrease 24-MAR-2017 (327,170) (0.01) 30,127,254 1.18
Increase 31-MAR-2017 532,932 0.02 30,660,186 1.20
At the END of the Year 31-MAR-2017 30,660,186 1.20
6 GOVERNMENT OF SINGAPORE At the beginning of the Year 31-MAR-2016 28,474,691 1.13
Increase 08-APR-2016 338,037 0.01 28,812,728 1.14
Decrease 22-APR-2016 (75,098) 0.00 28,737,630 1.14
Decrease 13-MAY-2016 (53,503) 0.00 28,684,127 1.13
Decrease 20-MAY-2016 (2,432) 0.00 28,681,695 1.13
Decrease 03-JUN-2016 (169,242) (0.01) 28,512,453 1.13
Decrease 10-JUN-2016 (75,734) 0.00 28,436,719 1.12
Increase 17-JUN-2016 56,676 0.00 28,493,395 1.13
Decrease 24-JUN-2016 (8,067) 0.00 28,485,328 1.13
Increase 30-JUN-2016 21,628 0.00 28,506,956 1.13
Increase 01-JUL-2016 2,785 0.00 28,509,741 1.13
Increase 08-JUL-2016 69,534 0.00 28,579,275 1.13
Increase 14-JUL-2016 23,572 0.00 28,602,847 1.13
Increase 15-JUL-2016 1,083 0.00 28,603,930 1.13
Increase 22-JUL-2016 2,134 0.00 28,606,064 1.13
Increase 29-JUL-2016 8,567 0.00 28,614,631 1.13
Decrease 12-AUG-2016 (59,283) 0.00 28,555,348 1.13
Increase 21-OCT-2016 85,229 0.00 28,640,577 1.13
Increase 28-OCT-2016 3,232 0.00 28,643,809 1.13
Increase 04-NOV-2016 6,215 0.00 28,650,024 1.12
Increase 11-NOV-2016 17,243 0.00 28,667,267 1.13
Increase 18-NOV-2016 13,737 0.00 28,681,004 1.13
Decrease 16-DEC-2016 (68,252) 0.00 28,612,752 1.12
Increase 27-JAN-2017 58,096 0.00 28,670,848 1.12
Increase 24-FEB-2017 654,662 0.03 29,325,510 1.15
Increase 03-MAR-2017 852,556 0.03 30,178,066 1.18
Increase 10-MAR-2017 97,472 0.00 30,275,538 1.18
Decrease 24-MAR-2017 (148,008) (0.01) 30,127,530 1.18
Decrease 31-MAR-2017 (12,200) 0.00 30,115,330 1.18
At the END of the Year 31-MAR-2017 30,115,330 1.18
7 ICICI PRUDENTIAL VALUE At the beginning of the Year 31-MAR-2016 28,708,163 1.14
DISCOVERY FUND Decrease 08-APR-2016 (290,104) (0.01) 28,418,059 1.12
Increase 15-APR-2016 53,274 0.00 28,471,333 1.13
Increase 22-APR-2016 58,627 0.00 28,529,960 1.13
Increase 29-APR-2016 296,922 0.01 28,826,882 1.14
Decrease 06-MAY-2016 (208,630) (0.01) 28,618,252 1.13
Decrease 13-MAY-2016 (496,056) (0.02) 28,122,196 1.11
Increase 20-MAY-2016 164,011 0.01 28,286,207 1.12
Increase 27-MAY-2016 44,359 0.00 28,330,566 1.12
Increase 03-JUN-2016 312,721 0.01 28,643,287 1.13

HDFC Bank Limited Annual Report 2016-17 46


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Decrease 10-JUN-2016 (124,126) (0.01) 28,519,161 1.13
Decrease 17-JUN-2016 (54,359) 0.00 28,464,802 1.12
Decrease 24-JUN-2016 (7,310) 0.00 28,457,492 1.12
Increase 30-JUN-2016 413,292 0.02 28,870,784 1.14
Increase 01-JUL-2016 598,896 0.02 29,469,680 1.16
Increase 08-JUL-2016 1,894,309 0.08 31,363,989 1.24
Increase 14-JUL-2016 1,255,349 0.05 32,619,338 1.29
Increase 15-JUL-2016 694,063 0.03 33,313,401 1.31
Increase 22-JUL-2016 5,021 0.00 33,318,422 1.31
Increase 29-JUL-2016 1,440,642 0.06 34,759,064 1.37
Increase 05-AUG-2016 309,035 0.01 35,068,099 1.38
Increase 12-AUG-2016 633,866 0.03 35,701,965 1.41
Increase 19-AUG-2016 980,866 0.04 36,682,831 1.45
Increase 26-AUG-2016 3,073,721 0.12 39,756,552 1.57
Increase 02-SEP-2016 1445835 0.06 41,202,387 1.62
Decrease 09-SEP-2016 (174,239) (0.01) 41,028,148 1.61
Increase 16-SEP-2016 204,282 0.01 41,232,430 1.62
Increase 23-SEP-2016 11,214 0.00 41,243,644 1.62
Decrease 30-SEP-2016 (97,499) 0.00 41,146,145 1.62
Increase 07-OCT-2016 405,230 0.02 41,551,375 1.63
Increase 14-OCT-2016 431,693 0.02 41,983,068 1.65
Increase 21-OCT-2016 82,656 0.00 42,065,724 1.65
Increase 28-OCT-2016 137,588 0.01 42,203,312 1.66
Decrease 04-NOV-2016 (104,359) 0.00 42,098,953 1.65
Decrease 11-NOV-2016 (292,130) (0.01) 41,806,823 1.64
Increase 18-NOV-2016 13,187 0.00 41,820,010 1.64
Decrease 25-NOV-2016 (137,872) (0.01) 41,682,138 1.64
Decrease 02-DEC-2016 (1,021,148) (0.04) 40,660,990 1.59
Decrease 09-DEC-2016 (181,156) (0.01) 40,479,834 1.59
Increase 16-DEC-2016 707,813 0.03 41,187,647 1.61
Increase 23-DEC-2016 85,679 0.00 41,273,326 1.62
Increase 30-DEC-2016 8,242 0.00 41,281,568 1.62
Decrease 06-JAN-2017 (295,053) (0.01) 40,986,515 1.60
Increase 13-JAN-2017 575,783 0.02 41,562,298 1.63
Decrease 20-JAN-2017 (343,773) (0.01) 41,218,525 1.61
Decrease 27-JAN-2017 (1,740,249) (0.07) 39,478,276 1.55
Decrease 03-FEB-2017 (1,802,625) (0.07) 37,675,651 1.47
Decrease 10-FEB-2017 (1,125,875) (0.04) 36,549,776 1.43
Decrease 17-FEB-2017 (119,547) (0.01) 36,430,229 1.42
Decrease 24-FEB-2017 (5,270,140) (0.21) 31,160,089 1.22
Decrease 03-MAR-2017 (6,985) 0.00 31,153,104 1.22
Decrease 10-MAR-2017 (502,860) (0.02) 30,650,244 1.20
Decrease 17-MAR-2017 (536,984) (0.02) 30,113,260 1.18
Decrease 24-MAR-2017 (626,159) (0.02) 29,487,101 1.15
Increase 31-MAR-2017 213,866 0.01 29,700,967 1.16
At the END of the Year 31-MAR-2017 29,700,967 1.16

HDFC Bank Limited Annual Report 2016-17 47


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
8 MORGAN STANLEY MAURITIUS At the beginning of the Year 31-MAR-2016 1,754,601 0.07
COMPANY LIMITED Decrease 08-APR-2016 (12) 0.00 1,754,589 0.07
Increase 15-APR-2016 97,817 0.00 1,852,406 0.07
Increase 22-APR-2016 15,231 0.00 1,867,637 0.07
Decrease 29-APR-2016 (3,864) 0.00 1,863,773 0.07
Decrease 06-MAY-2016 (153,311) (0.01) 1,710,462 0.07
Increase 20-MAY-2016 184,500 0.01 1,894,962 0.08
Increase 27-MAY-2016 40,538 0.00 1,935,500 0.08
Increase 03-JUN-2016 100,585 0.00 2,036,085 0.08
Increase 10-JUN-2016 56,069 0.00 2,092,154 0.08
Increase 17-JUN-2016 155,563 0.01 2,247,717 0.09
Increase 24-JUN-2016 346,501 0.01 2,594,218 0.10
Decrease 30-JUN-2016 (68,200) 0.00 2,526,018 0.10
Decrease 01-JUL-2016 (50,000) 0.00 2,476,018 0.10
Decrease 08-JUL-2016 (250,470) (0.01) 2,225,548 0.09
Increase 14-JUL-2016 21 0.00 2,225,569 0.09
Increase 15-JUL-2016 1,968 0.00 2,227,537 0.09
Decrease 22-JUL-2016 (12,000) 0.00 2,215,537 0.09
Decrease 29-JUL-2016 (82,034) 0.00 2,133,503 0.08
Increase 05-AUG-2016 14,771 0.00 2,148,274 0.09
Decrease 12-AUG-2016 (59,821) 0.00 2,088,453 0.08
Decrease 19-AUG-2016 (188,299) (0.01) 1,900,154 0.08
Increase 26-AUG-2016 13,900 0.00 1,914,054 0.08
Increase 02-SEP-2016 9 0.00 1,914,063 0.08
Increase 09-SEP-2016 6,526 0.00 1,920,589 0.08
Increase 16-SEP-2016 390,060 0.02 2,310,649 0.09
Increase 23-SEP-2016 784,500 0.03 3,095,149 0.12
Increase 30-SEP-2016 95,373 0.00 3,190,522 0.13
Increase 07-OCT-2016 14,000 0.00 3,204,522 0.13
Decrease 21-OCT-2016 (184,374) (0.01) 3,020,148 0.12
Decrease 28-OCT-2016 (966) 0.00 3,019,182 0.12
Decrease 04-NOV-2016 (30,501) 0.00 2,988,681 0.12
Increase 11-NOV-2016 27,000 0.00 3,015,681 0.12
Increase 18-NOV-2016 354,195 0.01 3,369,876 0.13
Increase 25-NOV-2016 182,126 0.01 3,552,002 0.14
Increase 02-DEC-2016 131,099 0.01 3,683,101 0.14
Increase 09-DEC-2016 131,117 0.01 3,814,218 0.15
Increase 16-DEC-2016 408,330 0.02 4,222,548 0.17
Increase 23-DEC-2016 919,700 0.04 5,142,248 0.20
Increase 06-JAN-2017 24,747 0.00 5,166,995 0.20
Increase 13-JAN-2017 390,472 0.02 5,557,467 0.22
Increase 20-JAN-2017 2,370,428 0.09 7,927,895 0.31
Increase 27-JAN-2017 1,822,194 0.07 9,750,089 0.38
Increase 03-FEB-2017 1,127,144 0.04 10,877,233 0.43
Increase 10-FEB-2017 463,112 0.02 11,340,345 0.44
Increase 17-FEB-2017 199,000 0.01 11,539,345 0.45
Increase 24-FEB-2017 9,019,226 0.35 20,558,571 0.80
Increase 03-MAR-2017 1,668,702 0.07 22,227,273 0.87

HDFC Bank Limited Annual Report 2016-17 48


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Increase 10-MAR-2017 1,044,741 0.04 23,272,014 0.91
Increase 17-MAR-2017 38,272 0.00 23,310,286 0.91
Increase 24-MAR-2017 31,946 0.00 23,342,232 0.91
Decrease 31-MAR-2017 (113,945) 0.00 23,228,287 0.91
At the END of the Year 31-MAR-2017 23,228,287 0.91
9 FRANKLIN TEMPLETON MUTUAL At the beginning of the Year 31-MAR-2016 19,482,226 0.77
FUND A/C FRANKLIN INDIA PRIMA Decrease 08-APR-2016 (4,123) 0.00 19,478,103 0.77
PLUS Increase 15-APR-2016 78,926 0.00 19,557,029 0.77
Increase 22-APR-2016 4,699 0.00 19,561,728 0.77
Increase 29-APR-2016 388,599 0.02 19,950,327 0.79
Increase 06-MAY-2016 311,037 0.01 20,261,364 0.80
Increase 13-MAY-2016 346,483 0.01 20,607,847 0.82
Increase 20-MAY-2016 101,025 0.00 20,708,872 0.82
Increase 27-MAY-2016 1,184 0.00 20,710,056 0.82
Increase 03-JUN-2016 100,668 0.00 20,810,724 0.82
Increase 10-JUN-2016 101,067 0.00 20,911,791 0.83
Increase 17-JUN-2016 2,622 0.00 20,914,413 0.83
Increase 24-JUN-2016 50,000 0.00 20,964,413 0.83
Decrease 30-JUN-2016 (342) 0.00 20,964,071 0.83
Increase 08-JUL-2016 532 0.00 20,964,603 0.83
Increase 14-JUL-2016 43 0.00 20,964,646 0.83
Increase 22-JUL-2016 150,448 0.01 21,115,094 0.83
Decrease 05-AUG-2016 (190) 0.00 21,114,904 0.83
Increase 12-AUG-2016 100,000 0.00 21,214,904 0.84
Decrease 19-AUG-2016 (6,142) 0.00 21,208,762 0.84
Increase 26-AUG-2016 598,422 0.02 21,807,184 0.86
Increase 02-SEP-2016 227,830 0.01 22,035,014 0.87
Decrease 09-SEP-2016 (310) 0.00 22,034,704 0.87
Decrease 16-SEP-2016 (10,448) 0.00 22,024,256 0.87
Increase 23-SEP-2016 67,346 0.00 22,091,602 0.87
Increase 07-OCT-2016 180,678 0.01 22,272,280 0.88
Decrease 14-OCT-2016 (940) 0.00 22,271,340 0.88
Increase 21-OCT-2016 125,000 0.01 22,396,340 0.88
Decrease 28-OCT-2016 (313) 0.00 22,396,027 0.88
Increase 04-NOV-2016 119,621 0.01 22,515,648 0.88
Decrease 11-NOV-2016 (834) 0.00 22,514,814 0.88
Decrease 18-NOV-2016 (359,952) (0.01) 22,154,862 0.87
Increase 25-NOV-2016 549 0.00 22,155,411 0.87
Increase 02-DEC-2016 93,757 0.00 22,249,168 0.87
Increase 09-DEC-2016 340 0.00 22,249,508 0.87
Increase 16-DEC-2016 80,000 0.00 22,329,508 0.88
Increase 23-DEC-2016 100,669 0.00 22,430,177 0.88
Increase 30-DEC-2016 286,619 0.01 22,716,796 0.89
Increase 13-JAN-2017 148,799 0.01 22,865,595 0.90
Decrease 27-JAN-2017 (447) 0.00 22,865,148 0.90
Increase 03-FEB-2017 99,339 0.00 22,964,487 0.90
Decrease 10-FEB-2017 (242,350) (0.01) 22,722,137 0.89

HDFC Bank Limited Annual Report 2016-17 49


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Decrease 17-FEB-2017 (98,279) 0.00 22,623,858 0.88
Decrease 24-FEB-2017 (130,280) (0.01) 22,493,578 0.88
Decrease 03-MAR-2017 (428) 0.00 22,493,150 0.88
Decrease 10-MAR-2017 (172,076) (0.01) 22,321,074 0.87
Decrease 17-MAR-2017 (420) 0.00 22,320,654 0.87
Decrease 24-MAR-2017 (23,391) 0.00 22,297,263 0.87
Decrease 31-MAR-2017 (152,111) (0.01) 22,145,152 0.86
At the END of the Year 31-MAR-2017 22,145,152 0.86
10 RELIANCE CAPITAL TRUSTEE CO At the beginning of the Year 31-MAR-2016 25,085,373 0.99
LTD A/C-RELIANCE VISION FUND Increase 08-APR-2016 347,322 0.01 25,432,695 1.01
Decrease 15-APR-2016 (14,000) 0.00 25,418,695 1.01
Decrease 22-APR-2016 (157,783) (0.01) 25,260,912 1.00
Increase 29-APR-2016 178,453 0.01 25,439,365 1.01
Increase 06-MAY-2016 322,848 0.01 25,762,213 1.02
Decrease 13-MAY-2016 (99,538) 0.00 25,662,675 1.02
Decrease 20-MAY-2016 (276) 0.00 25,662,399 1.02
Decrease 27-MAY-2016 (59,000) 0.00 25,603,399 1.01
Increase 03-JUN-2016 47,782 0.00 25,651,181 1.01
Increase 10-JUN-2016 19,138 0.00 25,670,319 1.01
Increase 17-JUN-2016 97,400 0.00 25,767,719 1.02
Decrease 24-JUN-2016 (226,811) (0.01) 25,540,908 1.01
Decrease 30-JUN-2016 (200,000) (0.01) 25,340,908 1.00
Decrease 01-JUL-2016 (30,000) 0.00 25,310,908 1.00
Increase 08-JUL-2016 13,877 0.00 25,324,785 1.00
Decrease 14-JUL-2016 (290,482) (0.01) 25,034,303 0.99
Increase 15-JUL-2016 3,375 0.00 25,037,678 0.99
Decrease 22-JUL-2016 (349,473) (0.01) 24,688,205 0.97
Decrease 29-JUL-2016 (122,625) (0.01) 24,565,580 0.97
Decrease 05-AUG-2016 (311,591) (0.01) 24,253,989 0.96
Increase 12-AUG-2016 5,827 0.00 24,259,816 0.96
Decrease 19-AUG-2016 (58,394) 0.00 24,201,422 0.95
Decrease 26-AUG-2016 (21,054) 0.00 24,180,368 0.95
Increase 02-SEP-2016 256,501 0.01 24,436,869 0.96
Decrease 09-SEP-2016 (66,429) 0.00 24,370,440 0.96
Decrease 16-SEP-2016 (162,127) (0.01) 24,208,313 0.95
Increase 23-SEP-2016 28,996 0.00 24,237,309 0.95
Decrease 30-SEP-2016 (171,800) (0.01) 24,065,509 0.95
Decrease 07-OCT-2016 (148,943) (0.01) 23,916,566 0.94
Decrease 14-OCT-2016 (113,150) 0.00 23,803,416 0.94
Decrease 21-OCT-2016 (421,988) (0.02) 23,381,428 0.92
Increase 28-OCT-2016 403,629 0.02 23,785,057 0.93
Decrease 04-NOV-2016 (682,896) (0.03) 23,102,161 0.91
Increase 11-NOV-2016 2,369,372 0.09 25,471,533 1.00
Decrease 18-NOV-2016 (231,715) (0.01) 25,239,818 0.99
Increase 25-NOV-2016 89,789 0.00 25,329,607 0.99
Increase 02-DEC-2016 533,220 0.02 25,862,827 1.01
Increase 09-DEC-2016 261,242 0.01 26,124,069 1.02
Increase 16-DEC-2016 247,872 0.01 26,371,941 1.03
Increase 23-DEC-2016 318,737 0.01 26,690,678 1.05

HDFC Bank Limited Annual Report 2016-17 50


Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
Decrease 30-DEC-2016 (477,654) (0.02) 26,213,024 1.03
Decrease 06-JAN-2017 (463,276) (0.02) 25,749,748 1.01
Increase 13-JAN-2017 3,275 0.00 25,753,023 1.01
Increase 20-JAN-2017 260,992 0.01 26,014,015 1.02
Increase 27-JAN-2017 85,347 0.00 26,099,362 1.02
Increase 03-FEB-2017 705,947 0.03 26,805,309 1.05
Decrease 10-FEB-2017 (7,682) 0.00 26,797,627 1.05
Decrease 17-FEB-2017 (183,837) (0.01) 26,613,790 1.04
Decrease 24-FEB-2017 (8,678,520) (0.34) 17,935,270 0.70
Increase 03-MAR-2017 3,103,896 0.12 21,039,166 0.82
Increase 10-MAR-2017 587,459 0.02 21,626,625 0.85
Decrease 17-MAR-2017 (96,151) 0.00 21,530,474 0.84
Increase 24-MAR-2017 1,031,778 0.04 22,562,252 0.88
Decrease 31-MAR-2017 (1,204,792) (0.05) 21,357,460 0.83
At the END of the Year 31-MAR-2017 21,357,460 0.83
*** Date of transfer has been considered as the date on which the beneficiary position was provided by the Depositories to the Bank.
Increase = Purchase of shares of the Bank Decrease = Sale of shares of the Bank
(v) Shareholding of Directors and Key Managerial Personnel

Sr. Name Remarks Date *** Shareholding at the Cumulative


No. beginning of the year shareholding during the year
No. Percentage of No. Percentage of
of total shares of of total shares of
shares the Bank shares the Bank
1 Aditya Puri At the beginning of the Year 31-MAR-2016 3,069,044 0.12
Increase in shareholding during the year 02-DEC-2016 112,500 0.00 3,181,544 0.12
Decrease in shareholding during the year 23-DEC-2016 (415,000) (0.02) 2,766,544 0.11
Increase in shareholding during the year 03-FEB-2017 675,000 0.03 3,441,544 0.13
At the END of the Year 31-MAR-2017 3,441,544 0.13
2 Bobby Parikh At the beginning of the Year 31-MAR-2016 3,837 0.00
Increase 13-MAY-2016 875 0.00 4,712 0.00
At the END of the Year 31-MAR-2017 4,712 0.00
Jointly With Relatives At the beginning of the Year 31-MAR-2016 3,538 0.00
At the END of the Year 31-MAR-2017 3,538 0.00
3 Kaizad Bharucha At the beginning of the Year 31-MAR-2016 884,455 0.04
Decrease in shareholding during the year 29-JUL-2016 (35,000) 0.00 849,455 0.03
Decrease in shareholding during the year 05-AUG-2016 (25,000) 0.00 824,455 0.03
Decrease in shareholding during the year 12-AUG-2016 (20,000) 0.00 804,455 0.03
Increase in shareholding during the year 02-SEP-2016 136,000 0.00 940,455 0.04
Decrease in shareholding during the year 30-SEP-2016 (16,000) 0.00 924,455 0.04
Increase in shareholding during the year 04-NOV-2016 28,000 0.00 952,455 0.04
Increase in shareholding during the year 02-DEC-2016 28,000 0.00 980,455 0.04
Decrease in shareholding during the year 24-MAR-2017 (30,000) 0.00 950,455 0.04
Decrease in shareholding during the year 31-MAR-2017 (12,404) 0.00 938,051 0.04
At the END of the Year 31-MAR-2017 938,051 0.04
Jointly With Relatives At the beginning of the Year 31-MAR-2016 500 0.00
At the END of the Year 31-MAR-2017 500 0.00
4 Keki Minoo Mistry At the beginning of the Year 31-MAR-2016 291,915 0.01
At the END of the Year 31-MAR-2017 291,915 0.01
Jointly With Relatives At the beginning of the Year 31-MAR-2016 4,215 0.00
At the END of the Year 31-MAR-2017 4,215 0.00
HDFC Bank Limited Annual Report 2016-17 51
Directors' Report

Sl. Name Remarks Date *** Shareholding at the Cumulative shareholding


No. beginning of the year during the year
No. of Percentage of No. of Percentage of
shares total shares of shares total shares of
the Bank the Bank
5 Renu Sud Karnad At the beginning of the Year 31-MAR-2016 294,620 0.01
Decrease in shareholding during the year 10-MAR-2017 (7,000) 0.00 287,620 0.01
At the END of the Year 31-MAR-2017 287,620 0.01
6 Paresh Sukthankar At the beginning of the Year 31-MAR-2016 842,655 0.03
Decrease in shareholding during the year 06-MAY-2016 (25,000) 0.00 817,655 0.03
Decrease in shareholding during the year 20-MAY-2016 (8,900) 0.00 808,755 0.03
Decrease in shareholding during the year 27-MAY-2016 (36,100) 0.00 772,655 0.03
Decrease in shareholding during the year 03-JUN-2016 (10,000) 0.00 762,655 0.03
Increase in shareholding during the year 30-JUN-2016 10,000 0.00 772,655 0.03
Decrease in shareholding during the year 29-JUL-2016 (30,000) 0.00 742,655 0.03
Decrease in shareholding during the year 05-AUG-2016 (25,000) 0.00 717,655 0.03
Decrease in shareholding during the year 12-AUG-2016 (9,500) 0.00 708,155 0.03
Decrease in shareholding during the year 19-AUG-2016 (15,500) 0.00 692,655 0.03
Decrease in shareholding during the year 26-AUG-2016 (29,000) 0.00 663,655 0.03
Decrease in shareholding during the year 02-SEP-2016 (1,000) 0.00 662,655 0.03
Decrease in shareholding during the year 30-SEP-2016 (4,000) 0.00 658,655 0.03
Increase in shareholding during the year 04-NOV-2016 30,000 0.00 688,655 0.03
Increase in shareholding during the year 02-DEC-2016 72,500 0.00 761,155 0.03
Decrease in shareholding during the year 09-DEC-2016 (10,000) 0.00 751,155 0.03
Decrease in shareholding during the year 16-DEC-2016 (24,000) 0.00 727,155 0.03
Decrease in shareholding during the year 23-DEC-2016 (36,000) 0.00 691,155 0.03
Increase in shareholding during the year 30-DEC-2016 110,000 0.00 801,155 0.03
Increase in shareholding during the year 03-FEB-2017 110,000 0.00 911,155 0.03
Decrease in shareholding during the year 10-FEB-2017 (15,000) 0.00 896,155 0.03
Decrease in shareholding during the year 17-FEB-2017 (20,000) 0.00 876,155 0.03
Decrease in shareholding during the year 10-MAR-2017 (15,000) 0.00 861,155 0.03
Decrease in shareholding during the year 17-MAR-2017 (30,000) 0.00 831,155 0.03
Decrease in shareholding during the year 24-MAR-2017 (20,000) 0.00 811,155 0.03
At the END of the Year 31-MAR-2017 811,155 0.03
Jointly With Relatives At the beginning of the Year 31-MAR-2016 3,250 0.00
At the END of the Year 31-MAR-2017 3,250 0.00
7 Sashidhar Jagdishan At the beginning of the Year 31-MAR-2016 582,594 0.02
Decrease in shareholding during the year 09-DEC-2016 (30,000) 0.00 552,594 0.02
Decrease in shareholding during the year 23-DEC-2016 (65,195) 0.00 487.399 0.02
Increase in shareholding during the year 30-DEC-2016 30,195 0.00 517,594 0.02
Increase in shareholding during the year 03-FEB-2017 138,000 0.01 655,594 0.03
Decrease in shareholding during the year 10-MAR-2017 (4,000) 0.00 651,594 0.03
At the END of the Year 31-MAR-2017 651,594 0.03
8 Sanjay Dongre At the beginning of the Year 31-MAR-2016 85,250 0.00
Decrease in shareholding during the year 29-APR-2016 (19,000) 0.00 66,250 0.00
Decrease in shareholding during the year 06-MAY-2016 (2,000) 0.00 64,250 0.00
Increase in shareholding during the year 30-SEP-2016 10,000 0.00 74,250 0.00
Increase in shareholding during the year 04-NOV-2016 7,500 0.00 81,750 0.00
Increase in shareholding during the year 02-DEC-2016 64,000 0.00 145,750 0.01
Decrease in shareholding during the year 24-FEB-2017 (15,000) 0.00 130,750 0.01
At the END of the Year 31-MAR-2017 130,750 0.01
← Date of transfer has been considered as the date on which the beneficiary position was provided by the Depositories to the
Bank. Increase in shareholding during the year = Allotment of equity shares on exercise of equity stock options
Decrease in shareholding during the year = Sale of shares of the Bank during the year

HDFC Bank Limited Annual Report 2016-17 52


Directors' Report

V. INDEBTEDNESS
Indebtedness of the Bank including interest outstanding / accrued but not due for payment: (` crore)

Secured Loans Unsecured Deposits (2) Total


excluding Loans (1) Indebtedness
deposits
Indebtedness at the beginning of the financial year
i) Principal Amount - 84,969.0 84,969.0
ii) Interest due but not paid - - -
iii) Interest accrued but not due - 438.0 438.0
Total (i+ii+iii) - 85,407.0 85,407.0
Change in Indebtedness during the financial year -
ss!DDITION - 480.8 480.8
ss2EDUCTION - (10,940.1) (10,940.1)
Net change - (10,459.3) (10,459.3)
Indebtedness at the end of the financial year -
i) Principal Amount - 74,028.9 74,028.9
ii) Interest due but not paid - -
iii) Interest accrued but not due 918.8 918.8
Total (i+ii+iii) - 74,947.7 74,947.7

Movement in long-term subordinated debt is shown on a gross basis.

Section 73 (1) of the Companies Act, 2013, states that the provisions of the said Act relating to acceptance of deposits by companies do
not apply to a Banking company as defined in the Reserve Bank of India Act, 1934. Accordingly, information relating to the Bank’s deposits
is not disclosed in the table above. As per the applicable provisions of the Banking Regulation Act, 1949, details of the Bank’s deposits
have been included under Schedule 3 - Deposits, in the preparation and presentation of the financial statements of the Bank.

Figures for the previous years have been adjusted to reflect the effect of reclassification as mentioned in point no. 1 of Sch 18 - Notes to
accounts.
VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:
A. Remuneration to Managing Director, Whole-time Directors and/or Manager: (`)
Name of Managing Director / Whole Time Director / Manager
Sr. Particulars of Remuneration Aditya Puri Paresh Sukthankar +AIZAD "HARUCHA Total
no. (Managing (Deputy Managing (Executive Amount
Director) Director) Director)
1 Gross Salary
a) Salary as per provisions contained in 81,204,425 50,114,058 38,618,286 169,936,769
Section 17(1) of the Income Tax Act, 1961
b) Value of perquisites u/s. 17(2) of Income 14,487,838 7,912,926 6,078,549 28,479,313
Tax Act, 1961 except stock options
c) Profits in lieu of salary under section 17(3) - - - -
of Income Tax Act, 1961.
2 Stock options exercised during the year*** 574,256,250 310,810,225 149,017,994 1,034,084,469
3 Sweat Equity - - - -
4 Commission - - - -
- as per cent of profits
- others, specify
5 Others * 4,879,884 2,781,456 1,914,000 9,575,340
Total (A) ** 100,572,147 60,808,440 46,610,835 207,991,422
Ceiling as per the Act^
← Section 198 of the Companies Act, 1956 (which corresponds to the now applicable section 197 of the Companies Act, 2013) does not by
virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies.
← Includes Provident Fund and tax exempted portion of Superannuation.
← Does not include the value of the stock options exercised during the year.
← This includes stock options granted and vested over several previous years, but exercised during the last financial year.

HDFC Bank Limited Annual Report 2016-17 53


Directors' Report

B. Remuneration to other Directors: (`)

Particulars of Remuneration
Sr. Name of Director Total
Fees for attending
no. # Others Amount
Board / committee Commission
meetings
Independent Directors

1 Mrs. Shyamala Gopinath 2,700,000 - 3,000,000 5,700,000

2 Mr. Partho Datta 2,300,000 1,000,000 3,300,000

3 Mr. Bobby Parikh 2,750,000 1,000,000 3,750,000

4 Mr. A.N. Roy 2,500,000 1,000,000 3,500,000

5 Mr. Malay Patel 1,450,000 1,000,000 2,450,000

Sub total (i) 11,700,000 4,000,000 3,000,000 18,700,000

Other Non-Executive Directors -

1 -RS 2ENUU+ARNAD 1,500,000 1,000,000 2,500,000

2 -R +EKIK-ISTRY 1,750,000 1,000,000 2,750,000

3 -R 5MESH #HANDRAA3ARANGI APPOINTEDPWEF 1,200,000 - 1,200,000


March 01, 2016)
4 Mr. Srikanth Nadhamuni (appointed w.e.f 550,000 - - 550,000
September 20, 2016)
Sub total (ii) 5,000,000 2,000,000 7,000,000

Total (i+ii) 1,670,0000 6,000,000 3,000,000 25,700,000

Overall ceiling as per the Act ^

←Pursuant to RBI Guidelines on Compensation To Non-Executive Directors of Private Sector Banks dated June 1, 2015 and the
resolution
passed by the shareholders at the 22nd Annual General Meeting of the Bank held on July 21, 2016, the non-executive directors,
including the independent directors, other than the Chairperson, were paid profit-related commission of ` 10,00,000/- each. The
commission paid during FY 2016-17 pertains to the FY 2015-16.

Total Managerial Remuneration = (A)+(B) = ` 233,691,422

← Section 198 of the Companies Act, 1956 (which corresponds to the now applicable section 197 of the Companies Act, 2013) does not,
by virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies.

HDFC Bank Limited Annual Report 2016-17 54


Directors' Report

C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MANAGING DIRECTOR/ WHOLE TIME DIRECTOR
/ MANAGER (`)

Sr. Key Managerial Personnel


Particulars of Remuneration Mr. Sanjay Dongre Mr. Sashidhar Jagdishan
no. Total
(Company Secretary) (Chief Financial Officer)
1 Gross salary
(a) Salary as per provisions contained in 94,13,304 1,93,28,104 2,87,41,408
section 17(1) of the Income-tax Act, 1961
(b) Value of perquisites u/s 17(2) of Income-tax 859,587 3,299,469 4,159,056
Act, 1961 except stock options
(c) Profits in lieu of salary under section 17(3) - - -
of Income-tax Act, 1961
2 Stock options exercised during the year*** 63,472,275 138,076,540 201,548,815
3 Sweat Equity - - -
4 Commission - - -
- as percent of profits
- others, specify

5 Others* 335,592 507,096 842,688


Total** 10,608,483 23,134,669 33,743,152

←Includes Provident Fund and tax exempted portion of superannuation. **


Does not include the value of stock options exercised during the year.
*** This includes stock options granted and vested over several previous years, but exercised during the last financial year.

VII. PENALTIES / PUNISHMENT / COMPOUNDING OF OFFENCES:

Type Section of the Brief Details of penalties Authority (RD / Appeal made,
Companies Act description / punishment / NCLT / Court) if any
compounding fees (give details)
imposed
A. COMPANY
Penalty
Punishment NONE
Compounding
B. DIRECTORS
Penalty
Punishment NONE
Compounding
C. OTHER OFFICERS IN DEFAULT
Penalty
Punishment NONE
Compounding
HDFC Bank Limited Annual Report 2016-17 55
ANNEXURE 4 to the Directors’ Report ← B
HDFC Bank Limited Annual Report 2016-17

U
Form No. AOC - 2 S
(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014) I
N
E
Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section S
S
188 of the Companies Act, 2013 including certain arm’s length transactions under third proviso thereto
-
1. Details of contracts or arrangements or transactions not at arm’s length basis: Nil A
T
2. Details of material contracts or arrangement or transactions at arm’s length basis (` crore) E
R
I
A
(a) Name(s) of the related HDB Financial Services Limited HDFC L
party Securities I
Limited T
Y
Nature of relationship Subsidiary of the Bank Subsidiary of
the Bank T
H
(b) Nature of contracts/ Receipt of Payment Payment of Payment of Credit facility Interest Syndicator / Receipt of R
E
arrangements/ Deposits towards Back Office Sales Support provided earned on Arranger & Deposits S
transactions collection Support Service Fees Credit Facility Investor H
services Service Fees provided O
availed L
D
S
(c) Duration of Varying 5NTILT 5 years 2 years 5P TO ᄉ - Varying Varying I
the contracts / maturities termination months maturities maturities S
arrangements/ A
transactions S
56

(d) Salient terms of Term and Services Back office Sales support Cash Credit Interest Syndicator / Term and P
R
the contracts or demand availed for support services for and Term earned Arranger Fees demand E
arrangements or deposits follow-up and services loans and third Loans for NCDs/ deposits S
C
transactions including placed with the collection of such as data party products provided Bonds placed with the
R
the value, if any: Bank customer dues processing provided by Bank I
and claims availed by the the Bank Value: 0.83 B
from insurance Bank E
D
companies
Outstanding Value: Value: Value: Outstanding Value: Investment Outstanding I
N

Value: 126.44 103.13 561.52 786.11 Value: 1180.15 139.21 Value: 1427.00 Value : 471.22 Rul
e
(e) Date(s) of approval by N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. (3)
the Board, if any: of
the
(f) Amount paid as Nil Security deposit: Nil Nil Nil Nil Nil Nil Co
advances, if any: 9.75 mp
ani
← 4HEHABOVE MENTIONEDITRANSACTIONS WERERENTEREDEINTO BY THEH"ANKKIN ITSTORDINARYYCOURSE OF
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Directors' Report
Directors' Report

ANNEXURE 5 to the Directors’ Report

Performance and financial position of subsidiaries and associates of the Bank as on March 31, 2017
(` crore)

Name of entity Net assets as of Profit or loss for the


March 31, 2017 year ended March 31, 2017

As percentage Amount*** As percentage Amount***


of consolidated of consolidated
net assets** profit or loss
Parent:

HDFC Bank Limited 97.46% 89,462.38 95.39% 14,549.66

Subsidiaries*:

1. HDFC Securities Limited 0.88% 807.41 1.42% 215.90

2. HDB Financial Services Limited 5.84% 5,362.90 4.49% 684.21

Minority Interest in all subsidiaries 0.32% 291.44 0.24% 36.72

*The subsidiaries are domestic entities


**Consolidated net assets are total assets minus total liabilities including minority interest
***Amounts are before inter-company adjustments.
(` crore)

Name of entity Investment as per equity method as Share of profit or loss for the year
of March 31, 2017 ended March 31, 2017

As percentage Amount As percentage Amount


of consolidated of consolidated
net assets profit or loss

Associate*:

International Asset Reconstruction 0.04% 40.30 0.02% 2.34


Company Private Limited
*The associate is a domestic entity

HDFC Bank Limited Annual Report 2016-17 57


Directors' Report

ANNEXURE 6 to the Directors’ Report

Disclosures on Remuneration
← Ratio of Remuneration of each director to the median employees’ remuneration for the year

Designation Ratio
Managing Director 187:1
Deputy Managing Director 113:1
Executive Director 93:1

Note:
← We have considered fixed pay for the computation of ratios as the performance bonus for the previous year for Whole time Directors
is subject to RBI approval.
← Fixed pay includes-Salary, Allowances, Retiral Benefits as well as value of perquisites excluding ESOPs
← The above includes all employees of the Bank excluding overseas employees.

← Percentage increase in remuneration of each Director, CFO, CEO, CS or Manager, if any, in the FY
Designation Percentage Increase
Managing Director 20.00
Deputy Managing Director 20.00
Executive Director * 40.00
Chief Financial Officer 5.00
Company Secretary 7.00

*The increase in the remuneration includes increase given for salary alignment with Whole Time Directors both internally and externally.

← Percentage Increase in the median remuneration of employees in the financial year

The percentage increase in median remuneration of employees in the financial year was 11.12 per cent. The percentage
movement in the median remuneration of the employees for the financial year was 1.51 per cent.
← The number of permanent employees on the rolls of the Bank

As of March 31, 2017 the number of permanent employees on the rolls of the Bank was 84,325.
← Average percentage increase already made in the salaries of employees other than the managerial personnel in the
last financial year and its comparison with the percentage increase in the managerial remuneration and justification
thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration.

4HEHAVERAGEGPERCENTAGE INCREASEAFOR +EYY-ANAGERIALA0ERSONNEL N


ᄉ PER CENT
The average percentage increase for Non Managerial Staff : 9.69 per cent

← Affirmation that the remuneration is as per the remuneration policy of the company: YES

HDFC Bank Limited Annual Report 2016-17 58


Directors' Report

ANNEXURE 7 to the Directors’ Report


Statement under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for
year ended March 31, 2017
Sr. Name of the Designation Date of Qualifications Age Exp. Total (`) Last Employment
No. Employee joining
the Bank
Details of top ten employees in terms of remuneration drawn
1 Aditya Puri Managing Director 12-Sep-94 B.Com, CA. 66 44 100,572,147 Citibank
2 Paresh Sukthankar Deputy Managing Director 01-Sep-94 B.Com, M.M.S, A.M.P 54 32 60,808,440 Citibank
(Harvard Business School)
3 Kaizad M. Bharucha Executive Director 04-Oct-95 B.Com 52 31 46,610,835 SBI Commercial &
International Bank Ltd.
4 Abhay Aima Group Head 02-Jan-95 Grad. from National Defence 55 30 26,264,867 INDSEC Securities & Finance
Academy Ltd.
5 Rakesh Singh Group Head 11-Apr-11 MBA, B.Sc 48 24 24,476,625 Roth Child
6 Navin Puri Group Head 01-Feb-99 B.Com, MBA, CA 59 34 24,090,454 ANZ Grindlays Bank
7 Ashish Parthasarthy Group Head 01-Nov-94 B.E., PGDM 49 28 23,523,385 INDSEC Investments Ltd.
8 Bhavesh Zaveri Group Head 13-Apr-98 M.Com., CAIIB 51 28 23,389,168 Barclays Bank
9 Sashidhar Jagdishan Group Head 05-Feb-96 B.Sc., ACA., M.A 52 25 23,134,669 Deutsche Bank
(Economics)
10 Payal Mandhyan* Vice President 18-Jan-05 PGDBM 39 13 22,684,467 India Bulls Securities Ltd.
Persons in service for the whole year and drawing emoluments more than ` 10,200,000/- per annum, other than the above

1 Abhishek Bhuwalka Sr Vice President-I 10-Jun-99 MBA, CWA, B.Com 40 21 13,784,220 Matchless Packaging
Industries (P) Ltd.
2 Ajay Kumar Kapoor Sr Exe Vice President 09-Oct-95 M.Sc. 53 31 12,955,221 Times Bank Ltd.
3 Akshat Lakhera Sr Vice President-I 09-Sep-10 PGDM, B.Sc 40 16 15,567,571 BNP Paribas
4 Ameya Shekhar Vice President 20-Mar-06 MBA, CA, B.Com 38 13 11,499,582 Tionale Enterprises Pvt Ltd
Shenoy
5 Amit Dayal Exe. Vice President 19-Dec-94 B.Sc., DBM 50 26 16,814,052 SBI Commercial &
International Bank Ltd
6 Anil L. Bhavnani Exe. Vice President 16-Jun-03 CS, B.Com 44 23 11,082,765 CitiCorp Finance I Ltd.
7 Ankush Pitale Exe. Vice President 28-Jul-14 MMS 45 21 13,324,739 Religare Capital Markets Pvt.
Limited
8 Anupama Rajesh Sr Vice President-I 14-Feb-07 LL.B, B.Com 49 25 13,680,448 Strategic Capital Corporation
Munagekar Pvt Ltd
9 Arun Mohanty Exe. Vice President 09-Nov-05 BA 59 35 12,791,009 Reserve Bank Of India
10 Arup Kumar Rakshit Sr Exe Vice President 01-Aug-06 PGDM, B.E 48 31 21,287,305 ABN Amro Bank
11 Arvind Kapil Group Head 18-Dec-98 MMS, B.E 46 23 15,214,374 GE Countrywide Consumer
Financial Services Ltd.
12 Aseem Dhru Group Head 02-May-15 CA,CWA, B.Com 47 22 18,399,069 HDFC Securities Ltd
13 Ashima Khanna Bhat Group Head 07-Nov-94 B. Bus, MMS 46 24 17,617,273 A F Ferguson & Co
14 Ashok Khanna Group Head 19-Jun-02 MA 60 36 15,977,850 Centurion Bank
15 Ashtosh Raina Sr Vice President-I 03-Sep-07 CAIIB, B.Sc 49 26 13,352,345 State Bank Of India
16 Atul Sadashiv Barve Exe. Vice President 28-Feb-07 MMS, MA, B.Sc 54 33 11,704,496 IDBI Ltd
17 Benjamin Frank Sr Exe Vice President 05-Apr-04 MBA, B.Sc 53 31 12,044,784 IDBI Bank Ltd.
18 Bhaskar C. Panda Sr Vice President-II 21-Nov-97 BA 55 32 17,049,345 Times Bank Ltd.
19 Charmaine Pereira Sr Vice President-II 01-Nov-94 DBM, BA 44 22 13,759,774 Fresher
20 Debajeet Das Sr Vice President-II 06-Aug-96 MA 45 22 18,032,347 Texport Syndicate
21 Dolreich D'Mello* Dy. Vice President 09-Jan-97 B.Com 41 20 12,406,545 ANZ Grindlays Bank
22 Farid Ahmed* Asst. Vice President 07-May-07 MBA, B.Sc 39 17 11,767,196 Kotak Mahindra Bank Ltd
23 Fayaz Ainodin Patel* Asst. Vice President 02-Aug-10 MBA, B.Com 38 14 10,303,038 Sharekhan Ltd
24 Gopalkrishnan Santosh Exe. Vice President 17-Jan-01 B.Com 47 25 10,882,803 American Express Bank
25 Govind Pandey Sr Exe Vice President 05-Aug-98 MSC 60 34 13,312,806 State Bank of Saurashtra
26 Gulzar Singh Sr Exe Vice President 28-Oct-96 PGDM, BA 46 23 12,895,189 Times Bank Ltd.
27 Harsh S Gupta* Sr Vice President-I 04-Sep-00 PGDBA, B.Sc 41 19 18,189,331 ICICI Cap Ltd

HDFC Bank Limited Annual Report 2016-17 59


Directors' Report

Sr. Name of the Designation Date of Qualifications Age Exp. Total (`) Last Employment
No. Employee joining
the Bank
28 Imran Ali Baig* Vice President ᄃ PGDBA, CFA-A, B.Sc 44 20 11,440,147 Fresher
*UN

29 *AYY3ONAWALAL Sr Vice President-II 12-Aug-99 MMS, B.Com 41 18 12,498,838 Fresher


30 *IMMYY4ATAT Group Head 15-Dec-94 B.Com., M.F.M., CFA 51 29 20,012,753Apple Industries Ltd.
31 + -ANOHARAA2AJ2 Sr Exe Vice President 06-Dec-96 CAIIB, B.Com 59 37 11,579,370Times Bank Ltd.
32 +APILP"ANSAL " Sr Vice President-I 30-Sep-04 PGPM, B.Com 39 18 13,053,654ICICI Bank Ltd.
33 +INJUL 3HARMA Asst. Vice President 22-Sep-08 Master's Degree/Dip,B.Com 36 12 11,004,904Citifinancial
34 Madhusoodan Hegde Exe. Vice President 11-Feb-97 CAIIB, B.Sc. 56 32 12,095,216Times Bank Ltd.
35 -AHESH +UMAR *UGAL Sr Vice President-I LLB, CS, CA, B.Com 40 15 11,183,86754)4"ANK ,TD
*UN

+ISHORETAPARIA A
36 Maheswara P Reddy Sr Vice President-I 06-May-02 MBA, BA 46 21 14,042,294American Express Bank
37 Makarand Shrikant Asst. Vice President 18-Mar-14 B.E 42 19 12,260,022ICICI Securities Limited
+HANDEKARD
38 -ANUU*OSEPH Dy. Vice President 13-Nov-11 MMS,B.E 40 15 12,467,442Citibank
39 Mathew Varghese* Asst. Vice President ᄃ MMS,B.E 38 15 10,613,306Citibank
*UL

40 Mayuresh Vasant Apte Sr Vice President-II 06-Nov-00 MMS, B.TECH, C.H.S.E, 48 24 11,889,576Centurion Bank Ltd
C.B.S.E
41 Michael Andrade Exe. Vice President 01-Aug-97 MFA, DSM, B.Sc. 49 29 10,359,492Barclays Bank
42 Mohammed Hannan Asst. Vice President MBA, BSc 38 14 12,313,621Barclays Bank PLC
*UL

Abdul*
43 Munish Mittal Group Head 17-Aug-96 PGDM, B.Sc. 49 30 14,329,500"ANK /FK0UNJAB
44 N. Srinivasan Exe. Vice President 11-Nov-96 CA, CWA, CS., B.Com 49 27 11,349,866Credential Finance
45 Neil Percy Francisco Group Head 20-May-02 MBA, M.Sc., BE 55 26 13,108,718Standard Chartered bank
46 Nirav Shah Group Head ᄃ MMS, B.Com 45 22 19,186,484Global Trust Bank
*UL

47 Nishant Nangia* Asst. Vice President 04-Apr-05 B.Com 35 14 12,816,723E-Serve International Ltd
48 Nishikant Das Exe. Vice President 23-Apr-12 PGDM, B.TECH 45 19 18,011,034Standard Chartered Bank
49 Nitin Chugh Group Head 16-Apr-01 PGDM, B.TECH 46 22 17,069,362Standered Chartered Bank
50 Nitin Subramanya Rao Group Head ᄃ BE, MBA 50 27 19,003,464BNP Paribas
*UL

51 Pallava Rathore* Vice President Master's Degree/Dip, BSc 41 16 10,566,455IDBI Bank Ltd
*UN

52 Parag Rao Group Head 15-Apr-02 MMS, B.E 52 28 14,487,588IBM Global Services
53 Philip Mathew Group Head 03-Apr-02 MA, B.Sc 54 28 13,402,36933+) )NVESTORT3ERVICESC
54 Pratap Luthra Dy. Vice President 13-Aug-05 MBA,BA 35 14 12,284,191ABN Amro Bank Ltd
55 Rahul Bhandari* Vice President 05-Feb-02 PGDBM, B.Com 39 15 14,318,661Fresher
56 2AJEEVV 3ENGUPTAN Exe. Vice President 21-Sep-07 PG (Gen Mgmt), B.E 56 34 11,452,865Hutchison Essar Ltd
57 2AJEEVV7ARIAR Vice President 15-Apr-10 PGDBA, B.E 42 18 16,800,081Citi Bank
58 2AJENDER 3EHGALR Group Head 23-Feb-98 B.Sc, MBA 62 40 17,558,390Times Bank Ltd.
59 2AJESH +UMAR Group Head 22-May-00 PGDM, B.Sc 46 28 14,425,888Trans America Apple Finance
Rathanchand Ltd.
60 2AJESH 3HARMA A Sr Vice President-II 15-Nov-00 CA,CS, B.Com 41 23 10,326,591LCC Infotech Ltd
61 2AJINDER "ABBARA Exe. Vice President LLB, B.Sc 50 30 13,530,295Centurion Bank Ltd
*AN

62 2AVEESH +UMAR "HATIA" Sr Exe Vice President 03-May-10 PGDM, B.Com 51 26 13,371,292Fore Consultants Pvt Ltd
63 Ravi Narayan Group Head 03-May-99 MBA, B.TECH 48 24 15,488,261Bank Of America
64 Ravi Ssn Sr Vice President-II 26-Nov-10 B.Com 49 17 11,133,605Deutsche Bank
65 2EJI *OHN Manager 30-Aug-10 PG Diploma, MA, BA 36 13 11,600,552Aviva India Life Insurance
Co Ltd
66 Resham A. Mahtani Sr Vice President-I 01-May-01 PGPIM, PGDBM, BA 41 19 12,978,555Mecklai Financial &
Commercial Services Ltd.

HDFC Bank Limited Annual Report 2016-17 60


Directors' Report

Sr. Name of the Designation Date of Qualifications Age Exp. Total (`) Last Employment
No. Employee joining
the Bank
67 Ritesh Sampat Sr Vice President-II CA, B.Com 41 17 15,096,463 Standard Chartered Bank
*AN

68 2OLI *AMTHE Asst. Vice President 05-Apr-11 MBA, B.Sc, PGDSM 40 16 19,818,230 Royal Bank Of Scotland
69 3ANJAYY$ONGRE E Exe. Vice President 02-May-95 B.Com, ACS, CWAINT, LL.B. 59 35 10,608,483 Boehringer Mannheim Ltd.
70 3ANJAYY+3INGLA I Sr Vice President-II 10-Nov-07 PGDM, B.Com 58 35 14,887,359 State Bank of India
71 Sanmoy Chakrabarti Exe. Vice President ᄃ MS, B.Sc 42 18 12,792,397 Bank Danamon
*UN

72 Sathyamurthy Sampath Exe. Vice President 07-Aug-00 B.Com 45 27 14,737,500 Integrated Finance Co. Ltd.
+UMAR A
73 Shailesh B. Exe. Vice President 01-Dec-94 MMS, B.Com 52 30 10,430,441 Citicorp Overseas s/w Ltd
Sukhthankar
74 Sharad Rungta Sr Vice President-II CFA, CA, B.Com 40 16 15,368,533 Credit Suisse AG
*UN

75 3HEETALE+APADIA Asst. Vice President 06-May-09 PGDMS, B.Com 40 17 13,535,124 ICICI Bank Ltd
76 Silvestre Anthony Vice President 15-Sep-06 MBA, PG Diploma, B.Com 39 15 14,974,588 54)4"ANK ,TD
Pereira
77 Sitanshu Mitra Exe. Vice President 01-Sep-95 MBA, B.Sc 49 29 10,609,777 ABN Amro Bank Ltd.
78 Smita Bhagat Sr Exe Vice President M.Com, MBA 52 29 13,347,040 PDCOR Ltd.
*UL

79 Sukarm Bali* Sr Vice President-I CA, B.Com 50 25 18,515,532 Times Bank Ltd.
*UL

80 Sumant Rampal Exe. Vice President 10-Aug-99 MBA, B.Com 42 20 10,834,497 Walchnad Capital Ltd.
81 Sundaresan M. Exe. Vice President 02-May-02 B.E (Mechanical), PSG, MBA 46 30 10,289,554 GE Countrywide Consumer
Financial Services Ltd.
82 5MASHANKAR 'OPALAN Dy. Vice President 13-Dec-12 B.Com 49 23 14,509,765 ICICI Bank
83 663 5NNIKRISHNAN Vice President 12-Apr-03 -"! "3C05# 42 19 13,101,738 Global Trust Bank Ltd
84 V. Chakrapani Group Head 24-Nov-94 B.Com, CAIIB, ACS 53 33 17,244,662 Standard Chartered Bank
85 Veerendra Rai* Asst. Vice President 23-Apr-11 PGDBA, BBA 38 14 11,350,131 2!+!"ANK
86 6IJAYY +RISHNAH-ULBAGAL Exe. Vice President PGPM, B.Sc 46 22 14,077,651 Diamond Management &
*AN

Technology Consultants
87 Vitthal Mangesh Sr Vice President-I 22-Sep-07 M.Sc., B.E 46 23 12,147,623 Barclays Capital
+ULKARNI I
Persons employed for part of the year drawing emoluments more than ` 850,000 per month

88 Deepak Maheshwari Group Head 09-Feb-96 CAIIB, B.Com 62 42 12,429,522 Times Bank Ltd.

89 Harsh Dugar Executive Vice President 23-Oct-96 CFA, CWA, B.Com 44 26 8,840,172 ICFAI Business School
90 ++"ALASUBRAMANIANN Group Head 03-May-16 CA, ICWA, B.Com 46 21 15,479,725 Citibank
91 +ARTIKI*AINI Executive Vice President 09-May-11 PGDM, B.Tech 47 24 12,623,837 ICICI Lombard General
Insurance Company Limited
92 .ITINT*AINI Sr Vice President-II 29-Sep-14 PGDBM, B.E 52 29 2,818,964 Cipher Capital Advisors Pvt
Ltd
93 Ravi Santhanam Exe. Vice President 01-Mar-17 PG Diploma, B.E 47 24 1,154,682 Vodafone India
94 T V N Raghuram* Senior Vice President - I 09-Oct-98 B.Com 48 28 9,989,208 Times Bank Ltd
Notes:
← Remuneration shown above includes basic salary, allowances, performance bonus, cash allowances in lieu of perquisites or taxable value of perquisites, if availed
as computed as per Income-tax rules but excludes Gratuity, PF settlement, Super Annuation settlement, Perquisite on ESOP & Super Annuation perquisite.
← All appointments are terminable by one / three months’ notice as the case may be on either side.
← The above list does not include Employees sent on Deputation whose salary is reimbursed by the other company.
← *Employee in overseas location.
← None of the employees listed above hold 2% or more of the paid-up share capital of the Bank as at March 31, 2017.
← Other than Mr. Aditya Puri, Managing Director who holds 0.13% of the paid up share capital of the Bank, the shareholding of the employees listed above does not
exceed 0.05% of the paid up share capital of the Bank as at March 31, 2017.
← None of the employees listed above is a relative of any director of the Bank.
HDFC Bank Limited Annual Report 2016-17 61
Directors' Report

ANNEXURE 8 to the Directors’ Report


Form No. MR-3
SECRETARIAL AUDIT REPORT
For the financial year ended March 31, 2017
[Pursuant to section 204 (1) of the Companies Act, 2013 and Rule No.9 of the Companies
(Appointment and Remuneration of Personnel) Rules, 2014]
To
The Members
HDFC Bank Limited
HDFC Bank House,
Senapati Bapat Marg,
Lower Parel (West),
Mumbai - 400 013
We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to corporate
practices by HDFC Bank Limited (hereinafter called the ‘Bank’) for the audit period from April 1, 2016 to March 31, 2017.
Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts / statutory
compliances and expressing our opinion thereon.
Based on our verification of the books, papers, minute books, forms and returns filed and other records maintained by the Bank and also the
information provided by the Bank, its officers, agents and authorized representatives during the conduct of Secretarial !UDIT
WEEHEREBYYREPORTTTHAT IN OURUOPINION
THEH"ANK HAS
DURING THEHAUDITDPERIODOFROM !PRIL
TO -ARCHR
THE @AUDITD period’), complied with the statutory provisions listed hereunder and also that the Bank has proper Board processes and
compliance
MECHANISMAIN PLACE TOITHE EXTENT
INTTHE MANNER AND SUBJECT TONTHEHREPORTING MADE HEREINAFTER
We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Bank for the
financial year ended on March 31, 2017 according to the provisions of:
II 4HEH#OMPANIESM!CT
E@THE!!CT
ANDTHE2ULESMADE THEREEUNDER

II 4HEH3ECURITIESI#ONTRACTS 2EGULATION G!CT


ᄃ IANDNTHE 2ULESEMADE THERE UNDER

III I 4HEH$EPOSITORIESE!CT
TAND THE2EGULATIONSDANDT"YE
LAWS FRAMED THERE UNDER

← The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):

A A 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG3UBSTANTIAL !CQUISITIONIOF 3HARES ANDF4AKEOVERS


2EGULATIONS
B B 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG0ROHIBITION OF )NSIDER 4RADING 2EGULATIONS

C C 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG3HARE "ASED %MPLOYEE "ENElTS N2EGULATIONS



D D 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG)SSUE AND ,ISTINGNOF $EBTF3ECURITIES 2EGULATIONS
← The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993
REGARDINGRTHEI#OMPANIESH!CT ANDODEALINGNWITH CLIENT
FF 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG,ISTING /BLIGATIONSOANDS$ISCLOSURE 2EQUIREMENTS 2EGULATIONS

GG 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG-ERCHANTA"ANKERS S2EGULATIONS


← The Securities and Exchange Board of India (Bankers to an Issue) Regulation, 1994
← The Banking Regulation Act, 1949 as specifically applicable to the Bank.
We have also examined compliance with the applicable clauses of the following:
3ECRETARIALA3TANDARDSAISSUED BYY4HEH)NSTITUTESOF #OMPANYY3ECRETARIESEOF )NDIA RELATED TOAMEETINGS AND MINUTES AND

← Listing Agreement entered into by the Bank with the Stock Exchanges.

HDFC Bank Limited Annual Report 2016-17 62


Directors' Report

During the period under review, the Bank has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards
etc. mentioned above.
During the period under review, provisions of the following regulations were not applicable to the Bank:

I I 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG)SSUE OFA#APITALLANDA$ISCLOSURE 2EQUIREMENTS


2EGULATIONS
II I 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG$ELISTING OFD%QUITY 3HARES 2EGULATIONS
III I 4HEH3ECURITIESIANDS%XCHANGE "OARD OFH)NDIAG"UYBACKKOF 3ECURITIES 2EGULATIONS
← Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct
Investment, Overseas Direct Investment and External Commercial Borrowings.
We further report that-
The Board of Directors of the Bank is duly constituted with proper balance of Executive Directors, Non-Executive Directors and
Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review
were carried out in compliance with the provisions of the Act.
Proper notice is given to all Directors to schedule the Board meetings in compliance with the provisions of Section 173(3) of the
Companies Act, 2013, agenda and detailed notes on agenda were sent at least seven days in advance and where the same were
given at shorter notice than 7 (seven) days, proper consent thereof were obtained and a system exists for seeking and obtaining
further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
$ECISIONSS AT THEH MEETINGS OF THEH "OARDA OF $IRECTORSC OF THEH "ANK WERER CARRIEDE THROUGHO ON THEH
BASISS OF MAJORITY
4HEREE WERER NO dissenting views by any member of the Board of Directors during the period under review.

We further report that there are adequate systems and processes in the Bank commensurate with the size and operations of the
Bank to monitor and ensure compliance with the applicable laws, rules, regulations and guidelines.
We further report that during the audit period, the Bank has following specific events:
The Bank has obtained approval of members for issue of Perpetual Debt Instruments, Tier II Capital Bonds and Senior Long Term
Infrastructure Bonds on a private placements basis of an amount in aggregate not exceeding Rs 50,000 Crore.
4HEH"ANK HASAISSUED ANDNALLOTTED ON 3EPTEMBERE
ON AAPRIVATETPLACEMENTEBASISS3ENIOR
5NSECURED
2EDEEMABLE
,ONG 4ERM
Non-Convertible Bonds in the nature of Debentures amounting to ` 6700 Crore (67000 Bonds of face value ` 10,00,000/- each).

For BNP & Associates


Company Secretaries
[Firm Regn. No. P2014MH037400]
B Narasimhan
Partner
FCS No.: 1303
C P No.: 10440
Place: Mumbai
Date: May 15, 2017
Note: This report is to be read with our letter of even date which is annexed as Annexure A and forms an integral part of this report.

HDFC Bank Limited Annual Report 2016-17 63


Directors' Report

Annexure A

To

The Members
HDFC Bank Limited
HDFC Bank House,
Senapati Bapat Marg,
Lower Parel (West),
Mumbai - 400 013

Secretarial Audit Report of even date is to be read along with this letter.

← The compliance of provisions of all laws, rules, regulations, standards applicable to HDFC Bank Limited (hereinafter called ‘the
Bank’) is the responsibility of the management of the Bank. Our examination was limited to the verification of records and
proce-dures on test check basis for the purpose of issue of the Secretarial Audit Report.

← Maintenance of secretarial and other records of applicable laws is the responsibility of the management of the Bank. Our
respon-sibility is to issue Secretarial Audit Report, based on the audit of the relevant records maintained and furnished to us by
the Bank, along with explanations where so required.

← We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness
of the contents of the secretarial and other legal records, legal compliance mechanism and corporate conduct. The verification
was done on test check basis to ensure that correct facts as reflected in secretarial and other records produced to us. We
believe that the processes and practices we followed, provides a reasonable basis for our opinion for the purpose of issue of
the Secretarial Audit Report.

← We have not verified the correctness and appropriateness of financial records and Books of Accounts of the Bank.

← Wherever required, we have obtained the management representation about list of applicable laws, compliance of laws, rules and
REGULATIONSAANDIMAJORSEVENTS DURINGNTHE AUDITEPERIOD
← The Secretarial Audit Report is neither an assurance as to the future viability of the Bank nor of the efficacy or effectiveness
with which the management has conducted the affairs of the Bank.

For BNP & Associates


Company Secretaries
[Firm Regn. No. P2014MH037400]

B Narasimhan
Partner
FCS No.: 1303
C P No.: 10440

HDFC Bank Limited Annual Report 2016-17 64


Independent Auditor's Report

To the Members of HDFC Bank Limited An audit involves performing procedures to obtain audit evidence
about the amounts and the disclosures in the standalone
Report on the Standalone Financial Statements financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of
We have audited the accompanying standalone financial
material misstatement of the standalone financial statements,
statements of HDFC BANK LIMITED (“the Bank”), which
whether due to fraud or error. In making those risk assessments,
comprise the Balance Sheet as at 31st March, 2017, the
the auditor considers internal financial controls relevant to the
Statement of Profit and Loss and the Cash Flow Statement
Bank’s preparation of the standalone financial statements that
for the year then ended, and a summary of the significant
give a true and fair view, in order to design audit procedures that
accounting policies and other explanatory information.
are appropriate in the circumstances. An audit also includes
Management’s Responsibility for the Standalone evaluating the appropriateness of the accounting policies used
Financial Statements and the reasonableness of the accounting estimates made by the
Bank’s Directors, and evaluating the overall presentation of the
The Bank’s Board of Directors is responsible for the matters standalone financial statements.
stated in Section 134(5) of the Companies Act, 2013 (“the Act”)
with respect to the preparation of these standalone financial We believe that the audit evidence obtained by us is sufficient
statements that give a true and fair view of the financial position, and appropriate to provide a basis for our audit opinion on the
financial performance and cash flows of the Bank in accordance standalone financial statements.
with the provisions of Section 29 of the Banking Regulation Act,
1949, accounting principles generally accepted in India, including Opinion
the Accounting Standards prescribed under Section 133 of the In our opinion and to the best of our information and
Act, in so far as applicable to banks, and the guidelines issued
according to the explanations given to us, the aforesaid
by the Reserve Bank of India.
standalone financial statements give the information required
This responsibility also includes maintenance of adequate by the Banking Regulation Act, 1949 and the Act in the
accounting records in accordance with the provisions of the manner so required and give a true and fair view in conformity
Act for safeguarding the assets of the Bank and for with the accounting principles generally accepted in India, of
preventing and detecting frauds and other irregularities; the state of affairs of the Bank as at 31st March, 2017, and its
selection and application of appropriate accounting policies; profit and its cash flows for the year ended on that date.
making judgments and estimates that are reasonable and
Report on Other Legal and Regulatory Requirements
prudent; and design, implementation and maintenance of
adequate internal financial controls, that were operating ← As required by Section 143(3) of the Act and Section 30
effectively for ensuring the accuracy and completeness of the of the Banking Regulation Act, 1949, based on our audit,
accounting records, relevant to the preparation and we report to the extent applicable that:
presentation of the standalone financial statements that give
a true and fair view and are free from material misstatement, ← We have sought and obtained all the information and
whether due to fraud or error. explanations which to the best of our knowledge and
belief were necessary for the purposes of our audit and
Auditor’s Responsibility
found them to be satisfactory.
Our responsibility is to express an opinion on these
← In our opinion, the transactions of the Bank which
standalone financial statements based on our audit.
have come to our notice have been within the
In conducting our audit, we have taken into account the powers of the Bank.
provisions of the Act, the accounting and auditing standards
and matters which are required to be included in the audit ← As explained in paragraph 2 below, the financial
report under the provisions of the Act and the Rules made accounting systems of the Bank are centralised
thereunder. and, therefore, accounting returns are not required
to be submitted by the Branches.
We conducted our audit of the standalone financial
statements in accordance with the Standards on Auditing ← In our opinion, proper books of account as required
specified under Section 143(10) of the Act. Those Standards by law have been kept by the Bank so far as it
require that we comply with ethical requirements and plan appears from our examination of those books.
and perform the audit to obtain reasonable assurance about
whether the standalone financial statements are free from ← The Balance Sheet, the Statement of Profit and Loss,
material misstatement. and the Cash Flow Statement dealt with by this Report
are in agreement with the books of account.

HDFC Bank Limited Annual Report 2016-17 65


← In our opinion, the aforesaid standalone financial ← The Bank has made provision, as required
statements comply with the Accounting Standards under the applicable law or accounting
prescribed under Section 133 of the Act, as standards, for material foreseeable losses, if
applicable. any, on long-term contracts including derivative
contracts;
← On the basis of the written representations received
from the directors as at 31st March, 2017 taken on ← There has been no delay in transferring
record by the Board of Directors, none of the amounts, required to be transferred, to the
directors is disqualified as at 31st March, 2017 from Investor Education and Protection Fund by the
being appointed as a director in terms of Section Bank.
164(2) of the Act. ← We report that during the course of our audit we performed
select relevant procedures at 85 branches. Since the Bank
← With respect to the adequacy of the internal financial
considers its key operations to be automated, with the key
controls over financial reporting of the Bank and the
applications largely integrated to the core banking systems,
operating effectiveness of such controls, refer to our
it does not require its branches, to submit any financial
separate report in “Annexure A”. Our report expresses returns. Accordingly our audit is carried out centrally at the
an unmodified opinion on the adequacy and operating Head Office and Central Processing Units, based on the
effectiveness of the Bank’s internal financial controls necessary records and data required for the purposes of the
over financial reporting. audit being made available to us.

← With respect to the other matters to be included in For Deloitte Haskins & Sells
the Auditor’s Report in accordance with Rule 11 of Chartered Accountants (Firm’s
the Companies (Audit and Auditors) Rules, 2014, as Registration No. 117365W)
amended, in our opinion and to the best of our
information and according to the explanations given Porus B. Pardiwalla
to us: Partner
(Membership No. 40005)
← The Bank has disclosed the impact of pending
litigations on its financial position in its
standalone financial statements; Mumbai
April 21, 2017

HDFC Bank Limited Annual Report 2016-17 66


ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S We believe that the audit evidence we have obtained is
REPORT sufficient and appropriate to provide a basis for our audit
(Referred to in paragraph 1.h under ‘Report on Other opinion on the Bank’s internal financial controls system over
Legal and Regulatory Requirements’ section of the financial reporting.
auditor’s report of even date) Meaning of Internal Financial Controls Over Financial
Reporting
Report on the Internal Financial Controls Over Financial
Reporting under Clause (i) of Sub-section 3 of Section A company’s internal financial control over financial reporting is a
143 of the Companies Act, 2013 (“the Act”) process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
We have audited the internal financial controls over financial statements for external purposes in accordance with generally
reporting of HDFC BANK LIMITED (“the Bank”) as at 31st accepted accounting principles and other applicable regulations.
March, 2017 in conjunction with our audit of the standalone A company’s internal financial control over financial reporting
financial statements of the Bank for the year ended on that date. includes those policies and procedures that (1) pertain to the
Management’s Responsibility for Internal Financial Controls maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
The Bank’s Management is responsible for establishing and
company;
maintaining internal financial controls based on the internal
← provide reasonable assurance that transactions are
control over financial reporting criteria established by the Bank
recorded as necessary to permit preparation of financial
considering the essential components of internal control stated in
statements in accordance with generally accepted accounting
the Guidance Note on Audit of Internal Financial Controls Over
principles, and that receipts and expenditures of the company
Financial Reporting issued by the Institute of Chartered
are being made only in accordance with authorisations of
Accountants of India. These responsibilities include the design,
management and directors of the company; and (3) provide
implementation and maintenance of adequate internal financial reasonable assurance regarding prevention or timely
controls that were operating effectively for ensuring the orderly detection of unauthorised acquisition, use, or disposition of
and efficient conduct of its business, including adherence to the company’s assets that could have a material effect on the
Bank’s policies, the safeguarding of its assets, the prevention financial statements.
and detection of frauds and errors, the accuracy and
completeness of the accounting records, and the timely Inherent Limitations of Internal Financial Controls Over
preparation of reliable financial information, as required under the Financial Reporting
Companies Act, 2013, the Banking Regulation Act, 1949 and the Because of the inherent limitations of internal financial
guidelines issued by the Reserve Bank of India. controls over financial reporting, including the possibility of
collusion or improper management override of controls,
Auditor’s Responsibility
material misstatements due to error or fraud may occur and
Our responsibility is to express an opinion on the Bank’s internal not be detected. Also, projections of any evaluation of the
financial controls over financial reporting based on our audit. We internal financial controls over financial reporting to future
conducted our audit in accordance with the Guidance Note on periods are subject to the risk that the internal financial control
Audit of Internal Financial Controls Over Financial Reporting (the over financial reporting may become inadequate because of
“Guidance Note”) issued by the Institute of Chartered changes in conditions, or that the degree of compliance with
Accountants of India and the Standards on Auditing prescribed the policies or procedures may deteriorate.
under Section 143(10) of the Companies Act, 2013, to the extent Opinion
applicable to an audit of internal financial controls. Those
In our opinion, to the best of our information and according to the
Standards and the Guidance Note require that we comply with
explanations given to us, the Bank has, in all material respects,
ethical requirements and plan and perform the audit to obtain
an adequate internal financial controls system over financial
reasonable assurance about whether adequate internal financial
reporting and such internal financial controls over financial
controls over financial reporting were established and maintained
reporting were operating effectively as at 31st March, 2017,
and if such controls operated effectively in all material respects.
based on the internal control over financial reporting criteria
established by the Bank considering the essential components of
An audit involves performing procedures to obtain audit internal control stated in the Guidance Note on Audit of Internal
evidence about the adequacy of the internal financial controls Financial Controls Over Financial Reporting issued by the
system over financial reporting and their operating Institute of Chartered Accountants of India.
effectiveness. Our audit of internal financial controls over
financial reporting included obtaining an understanding of For Deloitte Haskins & Sells
internal financial controls over financial reporting, assessing Chartered Accountants (Firm’s
the risk that a material weakness exists, and testing and Registration No. 117365W)
evaluating the design and operating effectiveness of internal
control based on the assessed risk. The procedures selected Porus B. Pardiwalla
depend on the auditor’s judgement, including the assessment Partner
of the risks of material misstatement of the financial Mumbai (Membership No. 40005) April 21, 2017
statements, whether due to fraud or error.

HDFC Bank Limited Annual Report 2016-17 67


Balance Sheet
As at March 31, 2017
` in ‘000
As at As at
Schedule 31-Mar-17 31-Mar-16
CAPITAL AND LIABILITIES
Capital 1 5,125,091 5,056,373
Reserves and surplus 2 889,498,416 721,721,274

Deposits 3 6,436,396,563 5,464,241,920

Borrowings 4 740,288,666 849,689,823

Other liabilities and provisions 5 567,093,181 367,251,338

Total 8,638,401,917 7,407,960,728


ASSETS

Cash and balances with Reserve Bank of India 6 378,968,755 300,583,087


Balances with banks and money at call and short notice 7 110,552,196 88,605,293

Investments 8 2,144,633,366 1,958,362,768

Advances 9 5,545,682,021 4,645,939,589

Fixed assets 10 36,267,379 33,431,573

Other assets 11 422,298,200 381,038,418

Total 8,638,401,917 7,407,960,728


Contingent liabilities 12 8,178,695,893 8,533,181,145

Bills for collection 308,480,352 234,899,997

Significant accounting policies and notes to the financial statements 17 & 18

The schedules referred to above form an integral part of the Balance Sheet.

As per our report of even date. For and on behalf of the Board

For Deloitte Haskins & Sells Shyamala Gopinath Aditya Puri Anami Roy

Chartered Accountants Chairperson Managing Director Bobby Parikh


Keki Mistry
P. B. Pardiwalla Paresh Sukthankar Kaizad Bharucha Malay Patel
Partner Deputy Managing Director Executive Director Partho Datta
Membership No.: 40005 Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Srikanth Nadhamuni
Executive Vice President Chief Financial Officer Umesh Sarangi
Mumbai, April 21, 2017 (Legal) & Company Secretary
Directors
HDFC Bank Limited Annual Report 2016-17 68
Statement of Profit and Loss
For the year ended March 31, 2017
` in ‘000
Year ended Year ended
Schedule 31-Mar-17 31-Mar-16
← INCOME
Interest earned 13 693,059,578 602,214,451
Other income 14 122,964,990 107,517,233
Total 816,024,568 709,731,684
II EXPENDITURE
Interest expended 15 361,667,334 326,299,330
Operating expenses 16 197,033,442 169,797,000
Provisions and contingencies 111,827,380 90,673,223
Total 670,528,156 586,769,553
III PROFIT
Net profit for the year 145,496,412 122,962,131
Balance in Profit and Loss account brought forward 235,276,891 186,277,944
Total 380,773,303 309,240,075
IV APPROPRIATIONS
Transfer to Statutory Reserve 36,374,103 30,740,533
Proposed dividend [Refer Schedule 18(2)] - 24,017,772
Tax (including cess) on dividend [Refer Schedule 18(2)] - 4,889,453
Dividend (including tax / cess thereon) pertaining to previous year paid (16,909) (117,135)
during the year, net of dividend tax credits
Transfer to General Reserve 14,549,641 12,296,213
Transfer to Capital Reserve 3,134,100 2,221,532
Transfer to / (from) Investment Reserve Account 42,934 (85,184)
Balance carried over to Balance Sheet 326,689,434 235,276,891
Total 380,773,303 309,240,075
V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) ` `
Basic 57.18 48.84
Diluted 56.43 48.26
Significant accounting policies and notes to the financial statements 17 & 18
The schedules referred to above form an integral part of the
Statement of Profit and Loss.

As per our report of even date. For and on behalf of the Board
For Deloitte Haskins & Sells Shyamala Gopinath Aditya Puri Anami Roy

Chartered Accountants Chairperson Managing Director Bobby Parikh


Keki Mistry
P. B. Pardiwalla Paresh Sukthankar Kaizad Bharucha Malay Patel
Partner Deputy Managing Director Executive Director Partho Datta
Membership No.: 40005 Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Srikanth Nadhamuni
Executive Vice President Chief Financial Officer Umesh Sarangi
Mumbai, April 21, 2017 (Legal) & Company Secretary
Directors
HDFC Bank Limited Annual Report 2016-17 69
Cash Flow Statement
For the year ended March 31, 2017
` in ‘000
Year ended Year ended
31-Mar-17 31-Mar-16
Cash flows from operating activities
Profit before income tax 221,390,750 186,379,247

Adjustments for:

Depreciation on fixed assets 8,331,247 7,058,390

(Profit) / loss on revaluation of investments (87,543) 173,689

Amortisation of premia on held to maturity investments 1,756,569 1,002,801

(Profit) / loss on sale of fixed assets 14,735 626

Provision / charge for non performing assets 33,443,592 22,963,803

Provision for dimunition in value of investment (76,417) 151,722

Floating provisions 250,000 1,150,000

Provision for standard assets 3,921,811 4,399,962

Dividend from subsidiaries / associates / joint ventures (1,628,640) (1,490,542)

Contingency provisions 384,640 218,102

267,700,744 222,007,800
Adjustments for:

(Increase) / decrease in investments (177,259,533) (391,352,982)

(Increase) / decrease in advances (933,161,021) (1,015,961,758)

Increase / (decrease) in deposits 972,154,643 956,285,495

(Increase) / decrease in other assets (38,752,713) (37,562,160)

Increase / (decrease) in other liabilities and provisions 223,763,890 32,720,884

314,446,010 (233,862,721)
Direct taxes paid (net of refunds) (78,591,989) (67,459,133)

Net cash flow (used in) / from operating activities 235,854,020 (301,321,854)
Cash flows used in investing activities

Purchase of fixed assets (10,681,751) (8,159,133)

Proceeds from sale of fixed assets 94,269 111,518

Investment in subsidiaries / associates / joint ventures (10,603,674) -

Dividend from subsidiaries / associates / joint ventures 1,628,640 1,490,542

Net cash used in investing activities (19,562,516) (6,557,074)


HDFC Bank Limited Annual Report 2016-17 70
Cash Flow Statement
For the year ended March 31, 2017
` in ‘000

Year ended Year ended


31-Mar-17 31-Mar-16
Cash flows from financing activities
Money received on exercise of stock options by employees 22,615,161 12,229,008

Increase / (decrease) in borrowings (excluding subordinate debt, (90,316,657) 357,278,283

perpetual debt and upper Tier II instruments)


Redemption of subordinated debt (19,084,500) (12,020,000)

Dividend paid during the year (24,083,093) (20,091,666)

Tax on dividend (4,807,223) (3,925,269)

Net cash generated from financing activities (115,676,312) 333,470,356


Effect of exchange fluctuation on translation reserve (282,622) 282,433
Net increase / (decrease) in cash and cash equivalents 100,332,571 25,873,862

Cash and cash equivalents as at April 1st 389,188,380 363,314,518


Cash and cash equivalents as at March 31st 489,520,951 389,188,380

As per our report of even date. For and on behalf of the Board
Shyamala Gopinath Aditya Puri Anami Roy
For Deloitte Haskins & Sells
Chartered Accountants Chairperson Managing Director Bobby Parikh
Keki Mistry
Paresh Sukthankar Kaizad Bharucha Malay Patel
P. B. Pardiwalla
Partner Partho Datta
Deputy Managing Director Executive Director
Membership No.: 40005
Renu Karnad
Sanjay Dongre Sashidhar Jagdishan Srikanth Nadhamuni
Executive Vice President Chief Financial Officer Umesh Sarangi
Mumbai, April 21, 2017 (Legal) & Company Secretary Directors

HDFC Bank Limited Annual Report 2016-17 71


Schedules to the Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 1 - CAPITAL
Authorised capital
3,25,00,00,000 (31 March, 2016: 2,75,00,00,000) Equity Shares of ` 2/- each 6,500,000 5,500,000
Issued, subscribed and paid-up capital
2,56,25,45,717 (31 March, 2016: 2,52,81,86,517) Equity Shares of ` 2/- each 5,125,091 5,056,373
Total 5,125,091 5,056,373
SCHEDULE 2 - RESERVES AND SURPLUS
I Statutory reserve
Opening balance 147,384,755 116,644,222
Additions during the year 36,374,103 30,740,533
Total 183,758,858 147,384,755
II General reserve
Opening balance 57,119,509 44,823,296
Additions during the year 14,549,641 12,296,213
Total 71,669,150 57,119,509

III Balance in profit and loss account 326,689,434 235,276,891


IV Share premium account

Opening balance 261,716,858 249,531,232


Additions during the year 22,546,443 12,185,626
Total 284,263,301 261,716,858
V Amalgamation reserve
Opening balance 10,635,564 10,635,564
Additions during the year - -
Total 10,635,564 10,635,564
VI Capital reserve
Opening balance 8,866,583 6,645,051
Additions during the year 3,134,100 2,221,532
Total 12,000,683 8,866,583
VII Investment reserve account
Opening balance 399,084 484,268
Additions during the year 109,506 76
Deductions during the year (66,572) (85,260)
Total 442,018 399,084
VIII Foreign currency translation account
Opening balance 322,030 39,597
Additions / (deductions) during the year (282,622) 282,433
Total 39,408 322,030
Total 889,498,416 721,721,274
HDFC Bank Limited Annual Report 2016-17 72
Schedules to the Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 3 - DEPOSITS
A I Demand deposits
(i) From banks 20,806,377 22,017,200
(ii) From others 1,134,932,192 862,229,501

Total 1,155,738,569 884,246,701


II Savings bank deposits 1,935,786,335 1,478,861,798
III Term deposits
(i) From banks 53,520,609 25,095,540
(ii) From others 3,291,351,050 3,076,037,881

Total 3,344,871,659 3,101,133,421


Total 6,436,396,563 5,464,241,920
B I Deposits of branches in India 6,396,405,854 5,397,071,812

II Deposits of branches outside India 39,990,709 67,170,108

Total 6,436,396,563 5,464,241,920

SCHEDULE 4 - BORROWINGS
← Borrowings in India
(i) Reserve Bank of India - 319,505,077
(ii) Other banks 21,202,156 15,792,856
(iii) Other institutions and agencies 224,500,000 -
(iv) Upper and lower tier II capital and innovative perpetual debts 131,820,000 144,279,000
(v) Bonds and Debentures (excluding subordinated debt) 126,750,000 59,750,000

Total 504,272,156 539,326,933


II Borrowings outside India* 236,016,510 310,362,890
Total 740,288,666 849,689,823
*Includes Upper Tier II debt of Nil (previous year: ` 662.55 crore)
Secured borrowings included in I & II above: Nil (previous year: Nil)
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

I Bills payable 166,670,863 73,784,974


II Interest accrued 38,488,877 35,987,631
III Others (including provisions) 338,011,290 208,559,451
IV Contingent provisions against standard assets 23,922,151 20,012,057
V Proposed dividend (including tax on dividend) [Refer Schedule 18(2)] - 28,907,225

Total 567,093,181 367,251,338

HDFC Bank Limited Annual Report 2016-17 73


Schedules to the Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
ICash in hand (including foreign currency notes) 42,635,945 55,694,577
II Balances with Reserve Bank of India:
(a) In current accounts 284,332,810 242,888,510
(b) In other accounts 52,000,000 2,000,000
Total 336,332,810 244,888,510
Total 378,968,755 300,583,087
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
← In India
← Balances with banks:
(a) In current accounts 5,107,980 2,380,626
(b) In other deposit accounts 6,686,831 6,824,510
Total 11,794,811 9,205,136
(ii) Money at call and short notice:
(a) With banks - -
(b) With other institutions - 1,359,867
Total - 1,359,867
Total 11,794,811 10,565,003
II Outside India
(i) In current accounts 36,772,777 23,909,955
(ii) In deposit accounts 2,529,150 3,776,535
(iii) Money at call and short notice 59,455,458 50,353,800
Total 98,757,385 78,040,290
Total 110,552,196 88,605,293
SCHEDULE 8 - INVESTMENTS
← Investments in India in
(i) Government securities 1,624,186,994 1,576,610,655
(ii) Other approved securities - -
(iii) Shares 1,113,742 739,032
(iv) Debentures and bonds 194,698,472 48,873,774
(v) Subsidiaries / joint ventures 38,433,239 27,829,565
(vi) Others (Units, CDs / CPs, PTCs and security receipts) 275,020,773 290,582,987
Total 2,133,453,220 1,944,636,013
← Investments outside India in
Other investments
(a) Shares 28,375 28,375
(b) Debentures and bonds 11,151,771 13,698,380
Total 11,180,146 13,726,755
Total 2,144,633,366 1,958,362,768

HDFC Bank Limited Annual Report 2016-17 74


Schedules to the Financial Statements
As at March 31, 2017

` in ‘000
As at As at
31-Mar-17 31-Mar-16
← Investments
← Gross value of investments
(a) In India 2,134,071,702 1,945,831,421
(b) Outside India 11,206,487 13,726,755
Total 2,145,278,189 1,959,558,176
← Provision for depreciation
(a) In India 618,482 1,195,408
(b) Outside India 26,341 -
Total 644,823 1,195,408
← Net value of investments
(a) In India 2,133,453,220 1,944,636,013
(b) Outside India 11,180,146 13,726,755
Total 2,144,633,366 1,958,362,768
SCHEDULE 9 - ADVANCES
A (i) Bills purchased and discounted 287,159,641 185,136,903
(ii) Cash credits, overdrafts and loans repayable on demand 1,336,174,162 1,242,774,115
(iii) Term loans 3,922,348,218 3,218,028,571
Total 5,545,682,021 4,645,939,589
B (i) Secured by tangible assets* 4,108,555,199 3,458,703,399

(ii) Covered by bank / government guarantees 107,864,309 114,128,823


(iii) Unsecured 1,329,262,513 1,073,107,367
Total 5,545,682,021 4,645,939,589
* Including advances against book debts

← IAdvances in India
(i) Priority sector 1,625,180,583 1,417,909,585
(ii) Public sector 157,741,065 134,556,082
(iii) Banks 9,092,668 4,659,631
(iv) Others 3,555,635,492 2,767,906,764
Total 5,347,649,808 4,325,032,062
← IIAdvances outside India
(i) Due from banks 6,500,391 6,879,777
← Due from others
(a) Bills purchased and discounted 2,560,707 1,245,263
(b) Syndicated loans 17,845,564 38,624,247
(c) Others 171,125,551 274,158,240
Total 198,032,213 320,907,527
Total 5,545,682,021 4,645,939,589
(Advances are net of provisions)
HDFC Bank Limited Annual Report 2016-17 75
Schedules to the Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16

SCHEDULE 10 - FIXED ASSETS

← Premises (including land)

Gross block

At cost on 31 March of the preceding year 15,511,704 14,756,943


Additions during the year 669,442 839,927

Deductions during the year (70,347) (85,166)

Total 16,110,799 15,511,704


Depreciation
As at 31 March of the preceding year 4,246,842 3,764,471

Charge for the year 590,691 551,090

On deductions during the year (59,060) (68,719)

Total 4,778,473 4,246,842


Net block 11,332,326 11,264,862
B Other fixed assets (including furniture and fixtures)
Gross block

At cost on 31 March of the preceding year 72,467,567 65,329,178

Additions during the year 10,604,552 8,548,465

Deductions during the year (2,153,212) (1,410,076)

Total 80,918,907 72,467,567


Depreciation
As at 31 March of the preceding year 50,300,856 45,104,307

Charge for the year 7,738,599 6,510,901

On deductions during the year (2,055,601) (1,314,352)

Total 55,983,854 50,300,856


Net block 24,935,053 22,166,711
C Assets on lease (plant and machinery)
Gross block

At cost on 31 March of the preceding year 4,546,923 4,546,923

Additions during the year - -

Total 4,546,923 4,546,923


HDFC Bank Limited Annual Report 2016-17 76
Schedules to the Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
4,104,467 4,104,467
Depreciation
As at 31 March of the preceding year
- -
Charge for the year
Total 4,104,467 4,104,467

Lease adjustment account 442,456 442,456

As at 31 March of the preceding year


- -
Charge for the year
442,456 442,456
Total
- -
Unamortised cost of assets on lease
36,267,379 33,431,573
Total
83,095,335 75,482,713
SCHEDULE 11 - OTHER ASSETS
Interest accrued 17,442,504 17,646,013
Advance tax / tax deducted at source (net of provisions) 267,871 220,786
IIIStationery and stamps - -
IV Non banking assets acquired in satisfaction of claims - -
Bond and share application money pending allotments 4,934,536 4,626,811
VI Security deposit for commercial and residential property 316,557,954 283,062,095
VII Others*
422,298,200 381,038,418
Total

*Includes deferred tax asset (net) of ` 2,447.34 crore (previous year: ` 2,116.62 crore) and deposits
placed with NABARD / SIDBI / NHB on account of shortfall in lending to priority sector of ` 11,882.37
crore (previous year: ` 13,719.68 crore)

SCHEDULE 12 - CONTINGENT LIABILITIES


10,721,500 11,877,300
Claims against the bank not acknowledged as debts - taxation
1,081,701 762,010
IIClaims against the bank not acknowledged as debts - others
4,699,301,366 5,290,757,746
IIILiability on account of outstanding forward exchange contracts
2,723,068,634 2,570,471,528
IV Liability on account of outstanding derivative contracts
Guarantees given on behalf of constituents:
366,232,012 301,311,242
In India
953,405 31,094,714
Outside India
359,613,744 317,525,754
VI Acceptances, endorsements and other obligations
17,723,531 9,380,851
VII Other items for which the Bank is contingently liable
8,178,695,893 8,533,181,145
Total

HDFC Bank Limited Annual Report 2016-17 77


Schedules to the Financial Statements
For the year ended March 31, 2017
` in ‘000
Year ended Year ended
31-Mar-17 31-Mar-16
SCHEDULE 13 - INTEREST EARNED
I Interest / discount on advances / bills 520,552,624 448,278,559
II Income from investments 159,443,391 141,200,321
III Interest on balance with RBI and other inter-bank funds 5,320,205 3,616,100
IV Others 7,743,358 9,119,471
Total 693,059,578 602,214,451
SCHEDULE 14 - OTHER INCOME

I Commission, exchange and brokerage 88,115,530 77,590,448


II Profit / (loss) on sale of investments (net) 11,306,936 7,491,483
III Profit / (loss) on revaluation of investments (net) 87,543 (173,689)
IV Profit / (loss) on sale of building and other assets (net) (14,735) (626)
V Profit / (loss) on exchange / derivative transactions (net) 12,633,895 12,277,267
VI Income earned by way of dividends from subsidiaries / 1,628,640 1,490,542
associates and / or joint ventures abroad / in India
VII Miscellaneous income 9,207,181 8,841,808
Total 122,964,990 107,517,233
SCHEDULE 15 - INTEREST EXPENDED

I Interest on deposits 313,314,571 291,782,889


II Interest on RBI / inter-bank borrowings 46,727,790 33,664,532
III Other interest 1,624,973 851,909
Total 361,667,334 326,299,330
SCHEDULE 16 - OPERATING EXPENSES

I Payments to and provisions for employees 64,836,646 57,021,980


II Rent, taxes and lighting 13,373,647 12,326,423
III Printing and stationery 4,757,998 4,234,603
IV Advertisement and publicity 2,046,418 2,483,938
V Depreciation on bank's property 8,331,247 7,058,390
VI Directors' fees / remuneration, allowances and expenses 32,021 25,761
VII Auditors' fees and expenses 25,758 19,331
VIII Law charges 1,249,095 998,702
IX Postage, telegram, telephone etc. 4,149,947 3,997,235
X Repairs and maintenance 12,562,041 10,287,303
XI Insurance 6,906,612 5,613,318
XII Other expenditure* 78,762,012 65,730,016
Total 197,033,442 169,797,000
*Includes professional fees, commission to sales agents, card and merchant acquiring expenses and
system management fees.

HDFC Bank Limited Annual Report 2016-17 78


Schedules to the Financial Statements
For the year ended March 31, 2017
SCHEDULE 17 - Significant accounting policies appended to and forming part of the financial statements for the year
ended March 31, 2017
BACKGROUND
HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company
engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury
operations. The Bank is governed by the Banking Regulation Act, 1949 and the Companies Act, 2013. The Bank has
overseas branch operations in Bahrain, Hong Kong and Dubai. The financial accounting systems of the Bank are
centralised and, therefore, accounting returns are not required to be submitted by branches of the Bank.
BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention and accrual basis of
accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India
(‘GAAP’), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the
Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) specified under Section 133 of the Companies
Act, 2013, in so far as they apply to banks and current practices prevailing within the banking industry in India.
Use of estimates
The preparation of financial statements in conformity with GAAP requires the management to make estimates and
assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses for the reporting period. Management believes that the
estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from
these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods.
PRINCIPAL ACCOUNTING POLICIES
1Investments
Classification:

In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of
purchase into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter
called “categories”). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under
each of these categories, investments are further classified under six groups (hereinafter called “groups”) - Government
Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and
Other Investments.
Purchase and sale transactions in securities are recorded under ‘Settlement Date’ of accounting, except in the case of
equity shares where ‘Trade Date’ accounting is followed.
Basis of classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.
Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of
subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not
classified in either of the above categories are classified under AFS category.
Acquisition cost:
Brokerage, commission, etc. and broken period interest on debt instruments are recognised in the Statement of Profit and
Loss and are not included in the cost of acquisition.
Disposal of investments:
Profit / Loss on sale of investments under the aforesaid three categories is recognised in the Statement of Profit and Loss.
Cost of investments is based on the weighted average cost method. The profit from sale of investment under HTM
category, net of taxes and transfer to statutory reserve is appropriated from the Statement of Profit and Loss to “Capital
Reserve” in accordance with the RBI Guidelines.

HDFC Bank Limited Annual Report 2016-17 79


Schedules to the Financial Statements
For the year ended March 31, 2017
Short sale:

The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines.
The short position is reflected as the amount received on sale and is classified under ‘Other Liabilities’. The short position is
marked to market and loss, if any, is charged to the Statement of Profit and Loss while gain, if any, is ignored. Profit / Loss
on settlement of the short position is recognised in the Statement of Profit and Loss.

Valuation:

Investments classified under AFS and HFT categories are marked to market as per the RBI guidelines.

Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices
declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives
Association (‘FIMMDA’), periodically.

The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’)
included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA.

The valuation of other unquoted fixed income securities (viz. State Government securities, other approved securities,
bonds and debentures) and preference shares, is done with a mark-up (reflecting associated credit and liquidity risk) over
the YTM rates for government securities published by FIMMDA.

Special bonds such as oil bonds, fertilizer bonds etc. which are directly issued by Government of India (‘GOI’) that do not
qualify for SLR are also valued by applying the mark-up above the corresponding yield on GOI securities.

Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per the RBI
guidelines.

Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.

Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost and
stated at acquisition cost.

Security receipts are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to
time.

Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the Statement
of Profit and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent of
depreciation already provided. The valuation of investments includes securities under repo transactions. The book value of
individual securities is not changed after the valuation of investments.

Investments classified under HTM category are carried at their acquisition cost and not marked to market. Any premium on
acquisition is amortised over the remaining maturity period of the security on a constant yield-to-maturity basis. Such
amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI
guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for.

Non-performing investments are identified and depreciation / provision are made thereon based on the RBI guidelines. The
depreciation / provision on such non-performing investments are not set off against the appreciation in respect of other
performing securities. Interest on non-performing investments is not recognised in the Statement of Profit and Loss until
received.

Repo and reverse repo transactions:

In accordance with the RBI guidelines, repurchase and reverse repurchase transactions in government securities and
corporate debt securities are reflected as borrowing and lending transactions respectively.

Borrowing cost on repo transactions is accounted for as interest expense and revenue on reverse repo transactions is
accounted for as interest income.

HDFC Bank Limited Annual Report 2016-17 80


Schedules to the Financial Statements
For the year ended March 31, 2017
Advances

Classification:

Advances are classified as performing and non-performing based on the RBI guidelines and are stated net of bills rediscounted,
inter-bank participation with risk, specific provisions, interest in suspense for non-performing advances, claims received from
Export Credit Guarantee Corporation, provisions for funded interest term loan classified as non-performing advances and
provisions in lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is transferred to an
interest suspense account and not recognised in the Statement of Profit and Loss until received.

Provisioning:

Specific loan loss provisions in respect of non-performing advances are made based on management’s assessment of the
degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI.

The specific provision levels for retail non-performing assets are also based on the nature of product and delinquency
levels. Specific loan loss provisions in respect of non-performing advances are charged to the Statement of Profit and Loss
and included under Provisions and Contingencies.

In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier
reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large
Credits (CRILC). Accelerated provision is also made on non-performing advances which are erstwhile SMA-2 accounts with
Aggregate Exposure (AE) ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or they fail to agree upon a
common Corrective Action Plan (CAP) within the stipulated time frame.

Non-performing advances are written-off in accordance with the Bank’s policies. Recoveries from bad debts written-off are
recognised in the Statement of Profit and Loss and included under other income.

In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire
amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts.

The Bank maintains general provision for standard assets including credit exposures computed as per the current marked
to market values of interest rate and foreign exchange derivative contracts, and gold in accordance with the guidelines and
at levels stipulated by RBI from time to time. In the case of overseas branches, general provision on standard advances is
maintained at the higher of the levels stipulated by the respective overseas regulator or RBI. Provision for standard assets
is included under other liabilities.

Provisions made in excess of the Bank’s policy for specific loan loss provisions for non-performing assets and regulatory
general provisions are categorised as floating provisions. Creation of floating provisions is considered by the Bank up to a
level approved by the Board of Directors. In accordance with the RBI guidelines, floating provisions are used up to a level
approved by the Board only for contingencies under extraordinary circumstances and for making specific provisions for
impaired accounts as per these guidelines or any regulatory guidance / instructions. Floating provisions are included under
other liabilities.

Further to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposures (other than for home country exposure). Countries are categorised into risk categories as per Export
Credit Guarantee Corporation of India Ltd. (‘ECGC’) guidelines and provisioning is done in respect of that country where
the net funded exposure is one percent or more of the Bank’s total assets. Provision for country risk is included under other
liabilities.

In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs,
but has reasons to believe on the basis of the extant environment or specific information or basis regulatory guidance /
instructions, of a possible slippage of a specific advance or a group of advances or exposures or potential exposures.
These are classified as contingent provisions and included under other liabilities.

The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s
financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would

HDFC Bank Limited Annual Report 2016-17 81


Schedules to the Financial Statements
For the year ended March 31, 2017
normally involve modification of terms of the advance / securities, which would generally include, among others, alteration
of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than
competitive reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of
the restructuring package. Necessary provision for diminution in the fair value of a restructured account is made and
classification thereof is as per the extant RBI guidelines. Restructuring of an account is done at a borrower level.

Securitisation and transfer of assets

The Bank securitises out its receivables to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such securitised-out
receivables are de-recognised in the balance sheet when they are sold (true sale criteria being fully met with) and consideration is
received by the Bank. Sales / Transfers that do not meet these criteria for surrender of control are accounted for as secured
borrowings. In respect of receivable pools securitised-out, the Bank provides liquidity and credit enhancements, as specified by the
rating agencies, in the form of cash collaterals / guarantees and / or by subordination of cash flows in line with RBI guidelines. The
Bank also acts as a servicing agent for receivable pools securitised-out.

The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash flows, which
are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables are
assigned directly to the purchaser and are not represented by Pass Through Certificates (‘PTCs’).

The RBI issued addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly,
the Bank does not provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent
to these guidelines. The Bank amortises any profit received for every individual securitisation or direct assignment
transaction based on the method prescribed in these guidelines.

In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken
through the direct assignment route, the Bank continues to amortise the profit / premium that arose on account of sale of
receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets
issued vide its circular dated February 1, 2006.

Any loss arising on account of sale of receivables is recognised in the Statement of Profit and Loss for the period in which
the sale occurs in accordance with the said RBI guidelines.

The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in the
case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where
the Bank is participating, the aggregate amount of the participation is classified under advances. In the case of participation
without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and where the Bank is
participating, the aggregate amount of participation is shown as due from banks under advances.

The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a
sale transaction, the Bank sells the fulfillment of priority sector obligation and in the case of a purchase transaction the
Bank buys the fulfillment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan
assets. The fee received for the sale of PSLCs is recorded as ‘Miscellaneous Income’ and the fee paid for purchase of the
PSLCs is recorded as ‘Other Expenditure’ in Statement of Profit and Loss.

In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value
(i.e., book value less provisions held), the shortfall is charged to the Statement of Profit and Loss and if the sale is for a
value higher than the net book value, the excess provision is credited to the Statement of Profit and Loss in the year the
amounts are received.

The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classified as investments. The
Bank also buys loans through the direct assignment route which are classified as advances. These are carried at acquisition cost
unless it is more than the face value, in which case the premium is amortised over the tenor of the loans.

Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of
purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is

HDFC Bank Limited Annual Report 2016-17 82


Schedules to the Financial Statements
For the year ended March 31, 2017
ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future
benefit / functioning capability from / of such assets.

Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The management believes
that the useful life of assets assessed by the Bank, pursuant to the Companies Act, 2013, taking into account changes in
environment, changes in technology, the utility and efficacy of the asset in use, fairly reflects its estimate of useful lives of
the fixed assets. The estimated useful lives of key fixed assets are given below:

Asset Estimated useful Estimated useful life


life as assessed specified under Schedule II
by the Bank of the Companies Act, 2013
Owned Premises 61 years 60 years
Automated Teller Machines (‘ATMs’) 10 years 15 years
Electrical equipment and installations 6 to 10 years 10 years
Office equipment 3 to 6 years 5 years
Computers 3 years 3 years
Modems, routers, switches, servers, network and related IT equipment 3 to 6 years 6 years
Motor cars 4 years 8 years
Furniture and fittings 16 years 10 years
ss
)MPROVEMENTS TOTLEASETHOLD PREMISESEAREHCHARGED OFFROVER THE REMAININGIPRIMARYYPERIODOOF LEASE
ss
3OFTWARERAND SYSTEM DEVELOPMENT EXPENDITURE ISTDEPRECIATEDSOVER A PERIODOOF ᄃ YEARS
ss
0OINT OFTSALE TERMINALS ARE FULLY DEPRECIATED INYTHEDYEARAOF PURCHASE
ss
&ORRASSETS PURCHASED AND SOLDHDURINGNTHE YEARDEPRECIATION ISSPROVIDEDDON PRO
RATATBASISBBYYTHET"ANK

7HENEVERRTHEREHIS A REVISION OFOTHE ESTIMATEDHUSEFUL LIFEEOF AN ASSET


STHEEUNAMORTISEDSDEPRECIABLE AMOUNTMIS CHARGED over the revised remaining useful life of the said asset.

0ROlTOON SALE OF IMMOVABLE PROPERTY NETEOF TAXES ANDNTRANSFER TO STATUTORYYRESERVE


ARERTRANSFERREDRTO CAPITALIRESERVE account.

Impairment of assets

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment
loss, if any, is provided in the Statement of Profit and Loss to the extent the carrying amount of assets exceeds their
estimated recoverable amount.

Transactions involving foreign exchange

Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date
of the transaction. Income and expenditure items of integral foreign operations (representative offices) are translated at the weekly
average closing rates and of non-integral foreign operations (foreign branches) at the monthly average closing rates.

Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates notified
by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net valuation profit or
loss arising due to a net open position in any foreign currency is recognised in the Statement of Profit and Loss.

Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing
exchange rates notified by FEDAI at the Balance Sheet date and the resulting profit / loss arising from exchange differences are
accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment in the non-integral
foreign operations in accordance with AS - 11, The Effects of Changes in Foreign Exchange Rates.

HDFC Bank Limited Annual Report 2016-17 83


Schedules to the Financial Statements
For the year ended March 31, 2017
Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the
closing spot and forward rates respectively as notified by FEDAI and at interpolated rates for contracts of interim maturities. The
USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year, is implied from MIFOR and LIBOR
curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for
valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward profit or loss on the deals are
discounted till the valuation date using the discounting yields. The resulting profit or loss on valuation is recognised in the
Statement of Profit and Loss. Foreign exchange contracts are classified as assets when the fair value is positive (positive marked
to market value) or as liabilities when the fair value is negative (negative marked to market value).

Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting
currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are
effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange
contract is amortised as expense or income over the life of the contract.

Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the
RESPECTIVEEFUTURE CONTRACTS ON THAT DAY
7HILEITHEHDAILYISETTLEMENT PRICECIS COMPUTED ON THEHBASISSOF THEHLAST HALF AN HOUR WEIGHTED average
price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may
be specified by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the
resultant marked to market profit / loss is daily settled with the exchange.

Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit,
acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.

Derivative contracts

The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which
the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates.
Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when
the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those
designated as hedges are recognised in the Statement of Profit and Loss.

Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to
market. In respect of derivative contracts that are marked to market, changes in the market value are recognised in the
Statement of Profit and Loss in the relevant period. The Bank identifies the hedged item (asset or liability) at the inception
of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically
thereafter. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Profit and Loss.

Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of
exchange notified by FEDAI as at the Balance Sheet date.

Revenue recognition

Interest income is recognised in the Statement of Profit and Loss on an accrual basis, except in the case of non-performing
assets and loan accounts where restructuring has been approved by the RBI under Strategic Debt Restructuring (SDR)
scheme where it is recognised upon realisation as per RBI norms.

Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their
effective interest rate.

Income on non-coupon bearing discounted instruments is recognised over the tenor of the instrument on a constant
effective yield basis.

Loan processing fee is recognised as income when due. Syndication / Arranger fee is recognised as income when a
significant act / milestone is completed.

Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines.

Dividend on equity shares, preference shares and on mutual fund units is recognised as income when the right to receive
the dividend is established.

HDFC Bank Limited Annual Report 2016-17 84


Schedules to the Financial Statements
For the year ended March 31, 2017
Guarantee commission, commission on letter of credit, annual locker rent fees and annual fees for credit cards are
recognised on a straight-line basis over the period of contract. Other fees and commission income are recognised when
due, where the Bank is reasonably certain of ultimate collection.

Employee benefits

Employee Stock Option Scheme (‘ESOS’):

The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank
to its employees. The options granted to employees vest in a graded manner and these may be exercised by the
employees within a specified period.

The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is
measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option
plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day
immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period.

Gratuity:

The Bank provides for gratuity to all employees. The benefit vests upon completion of five years of service and is in the
form of lump sum payment to employees on resignation, retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days basic salary payable for each completed year of service. The Bank makes
contributions to funds administered by trustees and managed by insurance companies for amounts notified by the said
insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a fund
set up by eLKB and administered by the Board of Trustees.

The defined gratuity benefit plans are valued by an independent actuary as at the Balance Sheet date using the projected
unit credit method as per the requirement of AS-15, Employee Benefits, to determine the present value of the defined
benefit obligation and the related service costs. Under this method, the determination is based on actuarial calculations,
which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss
is recognised in the Statement of Profit and Loss.

Superannuation:

Employees of the Bank, above a prescribed grade, are entitled to receive retirement benefits under the Bank’s Superannuation
Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the whole time
directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance companies, which administer the
fund. The Bank has no liability for future superannuation fund benefits other than its contribution, and recognises such
contributions as an expense in the year incurred, as such contribution is in the nature of defined contribution.

Provident fund:

In accordance with law, all employees of the Bank are entitled to receive benefits under the provident fund. The Bank
contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the
Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 15,000/- per
month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount
is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees,
employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered by RPFC and from
April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In
respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The
Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of
the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees
Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank.

The guidance note on implementing AS-15, Employee Benefits, states that benefits involving employer established
provident funds, which require interest shortfalls to be provided, are to be considered as defined benefit plans. Actuarial
valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of
Actuaries of India (IAI) and provision towards this liability is made.

HDFC Bank Limited Annual Report 2016-17 85


Schedules to the Financial Statements
For the year ended March 31, 2017
The overseas branches of the Bank make contribution to the respective relevant government scheme calculated as a
percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are expensed when
due, as such contribution is in the nature of defined contribution.
Leave encashment / Compensated absences:
The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees under
Indian Banks’ Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based on an
independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early
retirement, salary increases, interest rates and leave utilisation.
Pension:
In respect of pension payable to certain eLKB employees under IBA structure, which is a defined benefit scheme, the Bank
contributes 10% of basic salary to a pension fund set up by the Bank and administered by the Board of Trustees and the balance
amount is provided based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary.

In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and
had completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will
be converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands
frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for.
In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years,
pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision
thereto is made based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary.
Debit and credit cards reward points
The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial
method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends.
Provisions for liabilities on the outstanding reward points are made based on the actuarial valuation report as furnished by
the said independent actuary and included in other liabilities.
Bullion
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail customers.
The imports are typically on a back-to-back basis and are priced to the customer based on an estimated price quoted by the
supplier. The Bank earns a fee on such wholesale bullion transactions. The fee is classified under commission income.

The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classified as
interest expense / income respectively.
Lease accounting
Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Profit and
Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases.
Income tax
Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with
the Income Tax Act, 1961, the rules framed there under and considering the material principles set out in Income
Computation and Disclosure Standards) and the net change in the deferred tax asset or liability during the year. Deferred
tax assets and liabilities are recognised for the future tax consequences of timing differences between the carrying values
of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred tax assets and
liabilities are measured using the enacted or substantively enacted tax rates as at the Balance Sheet date.
Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by the
same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis.

Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. In case
of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is

HDFC Bank Limited Annual Report 2016-17 86


Schedules to the Financial Statements
For the year ended March 31, 2017
virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and
appropriately adjusted to reflect the amount that is reasonably / virtually certain to be realised.
Earnings per share
The Bank reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic
earnings per equity share has been computed by dividing net profit for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue equity shares were exercised or converted to equity during
the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and the
dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.
Share issue expenses
Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.
Segment information
The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines
issued by RBI.
Accounting for provisions, contingent liabilities and contingent assets
In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Bank recognises provisions when it
has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date,
supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to
reflect the current management estimates.
A disclosure of contingent liability is made when there is:
AA POSSIBLE OBLIGATION ARISINGI FROM AA PAST EVENT
THEH EXISTENCEE OF WHICHI WILL BE CONlRMEDE BY THEH OCCURRENCE OR non-occurrence of one or more uncertain future
events not within the control of the Bank; or

AAPRESENTSOBLIGATION ARISINGIFROM AAPAST EVENTNWHICHIIS NOTORECOGNISEDNAS IT IS NOTOPROBABLE THAT AN OUTmOWWOF


RESOURCESU will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

7HEN THEREEIS AAPOSSIBLE OBLIGATION OR AAPRESENTSOBLIGATION IN RESPECTPOF


WHICHITHEHLIKELIHOODHOF OUTmOWWOF RESOURCESUIS REMOTE
no provision or disclosure is made.

Contingent assets, if any, are not recognised in the financial statements since this may result in the recognition of income
that may never be realised.
Onerous contracts

Provisions for onerous contracts are recognised when the expected benefits to be derived by the Bank from a contract are
lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the
present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the
contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that
contract.
Cash and cash equivalents
Cash and cash equivalents include cash and gold in hand, balances with RBI, balances with other banks and money at call
and short notice.
Corporate social responsibility
Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, are recognised in the
Statement of Profit and Loss.

HDFC Bank Limited Annual Report 2016-17 87


Schedules to the Financial Statements
For the year ended March 31, 2017
SCHEDULE 18 - Notes forming part of the financial statements for the year ended March 31, 2017
Amounts in notes forming part of the financial statements for the year ended March 31, 2017 are denominated in rupee crore to
conform to extant RBI guidelines.
Change in classification
Pursuant to RBI circular dated May 19, 2016, the Bank has, included its repurchase / reverse repurchase transactions under
Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) with RBI under ‘Borrowings from RBI’ / ‘Balances
with RBI’, as the case may be. Hitherto, these transactions were netted from / included under ‘Investments’. Figures of the
previous year have been regrouped / reclassified to conform to current year’s classification. The above change in
classification has no impact on the profit of the Bank for the years ended March 31, 2017 and March 31, 2016.
Proposed dividend
The Board of Directors, at their meeting held on April 21, 2017 have proposed a dividend of ` 11.00 per equity share aggregating
3,392.71 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at the Annual General Meeting.
In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notified by the
Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not
appropriated proposed dividend from Statement of Profit and Loss for the year ended March 31, 2017. Accordingly, the proposed
dividend and the tax thereon, under Appropriations in the Statement of Profit and Loss is lower by
2,818.80 crore and ` 573.91 crore respectively and the balance of Other Liabilities is lower by an equivalent amount as at
March 31, 2017. However, the effect of the proposed dividend has been reckoned in determining capital funds in the
computation of the capital adequacy ratio as at March 31, 2017.
Capital adequacy
The Bank’s capital to risk-weighted asset ratio (‘Capital Adequacy Ratio’) as at March 31, 2017 is calculated in accordance
with the RBI’s guidelines on Basel III capital regulations (‘Basel III’). The phasing in of the minimum capital ratio requirement
under Basel III is as follows:
(% of RWAs)
Minimum ratio of capital to risk-weighted assets As on March 31,
2016 2017 2018 2019
Common equity tier I 6.125 6.750 7.375 8.000
Tier I capital 7.625 8.250 8.875 9.500
Total capital 9.625 10.250 10.875 11.500

The above minimum CET1, Tier I and Total capital ratio requirement includes capital conservation buffer.

The Bank’s capital adequacy ratio computed under Basel III is given below:
(` crore)
Particulars March 31, 2017 March 31, 2016
Tier I capital 81,829.30 70,032.52
Of which common equity tier I capital 81,829.30 70,032.52
Tier II capital 11,302.66 12,243.44
Total capital 93,131.96 82,275.96
Total risk weighted assets 640,029.93 529,768.14
Capital adequacy ratios under Basel lII
Tier I 12.79% 13.22%
Of which common equity tier I 12.79% 13.22%
Tier II 1.76% 2.31%
Total 14.55% 15.53%

The Bank has not raised any additional tier I and tier II capital during the years ended March 31, 2017 and March 31, 2016.

HDFC Bank Limited Annual Report 2016-17 88


Schedules to the Financial Statements
For the year ended March 31, 2017
Subordinated debt (lower Tier II capital), upper Tier II capital and innovative perpetual debt instruments outstanding as at
March 31, 2017 are ` 10,402.00 crore (previous year: ` 10,812.00 crore), ` 2,780.00 crore (previous year: ` 4,078.45 crore)
and nil (previous year: ` 200.00 crore) respectively.
In accordance with RBI guidelines, banks are required to make Pillar 3 disclosures under Basel III capital regulations. The
Bank’s Pillar 3 disclosures are available on its website at the following link: http://www.hdfcbank.com/aboutus/basel_
disclosures/default.htm. These Pillar 3 disclosures have not been subjected to audit or review by the statutory auditors.
Capital infusion
During the year ended March 31, 2017, the Bank allotted 3,43,59,200 equity shares (previous year: 2,16,91,200 equity shares)
aggregating to face value ` 6.87 crore (previous year: ` 4.34 crore) in respect of stock options exercised. Accordingly, share
capital increased by ` 6.87 crore (previous year: ` 4.34 crore) and share premium increased by ` 2,254.64 crore (previous year:
1,218.56 crore).
Details of movement in the paid-up equity share capital of the Bank are given below: (` crore)

Particulars March 31, 2017 March 31, 2016


Opening balance 505.64 501.30
Addition pursuant to stock options exercised 6.87 4.34
Closing balance 512.51 505.64

Earnings per equity share


Basic and diluted earnings per equity share have been calculated based on the net profit after taxation of ` 14,549.66 crore
(previous year: ` 12,296.23 crore) and the weighted average number of equity shares outstanding during the year of
2,54,43,33,609 (previous year: 2,51,74,29,120).
Following is the reconciliation between basic and diluted earnings per equity share:

Particulars For the years ended


March 31, 2017 March 31, 2016
Nominal value per share (`) 2.00 2.00
Basic earnings per share (`) 57.18 48.84
Effect of potential equity shares (per share) (`) (0.75) (0.58)
Diluted earnings per share (`) 56.43 48.26

Basic earnings per equity share has been computed by dividing net profit for the year attributable to the equity shareholders
by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share has been
computed by dividing the net profit for the year attributable to the equity shareholders by the weighted average number of
equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. The
dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of dilution on the profits
in the current year and previous year.
Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted
earnings per share:
Particulars For the years ended

March 31, 2017 March 31, 2016


Weighted average number of equity shares used in computing basic earnings 2,54,43,33,609 2,51,74,29,120
per equity share
Effect of potential equity shares outstanding 3,40,55,428 3,04,43,320

Weighted average number of equity shares used in computing diluted earnings 2,57,83,89,037 2,54,78,72,440

per equity share

HDFC Bank Limited Annual Report 2016-17 89


Schedules to the Financial Statements
For the year ended March 31, 2017
Reserves and Surplus Draw

down from reserves

Share Premium

The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2017 and March 31, 2016.

Statutory Reserve

The Bank has made an appropriation of ` 3,637.41 crore (previous year: ` 3,074.05 crore) out of profits for the year ended
March 31, 2017 to Statutory Reserve pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and
RBI guidelines dated September 23, 2000.

Capital Reserve

During the year ended March 31, 2017, the Bank appropriated ` 313.41 crore (previous year: ` 222.15 crore), being the profit
from sale of investments under HTM category and profit on sale of immovable properties, net of taxes and transfer to
statutory reserve, from Profit and Loss Account to Capital Reserve Account.

General Reserve

The Bank has made an appropriation of ` 1,454.96 crore (previous year: ` 1,229.62 crore) out of profits for the year ended
March 31, 2017 to General Reserve.

Investment Reserve Account

During the year ended March 31, 2017, the Bank has appropriated ` 4.29 crore (net) from Profit and Loss Account to
Investment Reserve Account as per RBI guidelines. In the previous year, the Bank had transferred ` 8.52 crore (net) from
Investment Reserve Account to Profit and Loss Account as per RBI guidelines.

Dividend on shares allotted pursuant to exercise of stock options

The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise of
any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2017, if
approved at the ensuing Annual General Meeting.

Accounting for employee share based payments

The shareholders of the Bank approved grant of equity share options under Plan “C” in June 2005, Plan “D” in June 2007, Plan “E”
in June 2010, Plan “F” in June 2013 and Plan “G” in July 2016. Under the terms of each of these Plans, the Bank may issue to its
employees and Whole Time Directors, Equity Stock Options (‘ESOPs’) each of which is convertible into one equity share. All the
plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines,
1999 as amended from time to time and as applicable at the time of grant. Accounting for the stock options has been in accordance
with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent applicable.

Plans C, D, E, F and G provide for the issuance of options at the recommendation of the Nomination & Remuneration
Committee at the closing price on the working day immediately preceding the date when options are granted. This closing
price is the closing price of the Bank’s equity share on an Indian stock exchange with the highest trading volume as of the
working day preceding the date of grant.

Vesting conditions applicable to the options are at the discretion of the Nomination & Remuneration Committee. These
options are exercisable on vesting, for a period as set forth by the Nomination & Remuneration Committee at the time of
grant. The period in which options may be exercised cannot exceed five years. During the years ended March 31, 2017 and
March 31, 2016, no modifications were made to the terms and conditions of ESOPs as approved by the Nomination &
Remuneration Committee.

HDFC Bank Limited Annual Report 2016-17 90


Schedules to the Financial Statements
For the year ended March 31, 2017
Activity in the options outstanding under the Employee Stock Option Plans
!CTIVITY INITHEYOPTIONS OUTSTANDINGPUNDEROTHESVARIOUS EMPLOYEE STOCKKOPTION PLANS AS AT -ARCH
Particulars Number Weighted average
of options exercise price (`)
Options outstanding, beginning of year 12,86,54,300 840.19
Granted during the year - -

Exercised during the year 3,43,59,200 658.20

Forfeited / Lapsed during the year 21,38,800 972.97

Options outstanding, end of year 9,21,56,300 904.97

Options exercisable 5,63,14,000 835.06

s !CTIVITY INITHEYOPTIONS OUTSTANDINGPUNDEROTHESVARIOUS EMPLOYEE STOCKKOPTION PLANS AS AT -ARCH

Particulars Number Weighted average


of options exercise price (`)
Options outstanding, beginning of year 10,90,33,000 683.16
Granted during the year 4,48,36,200 1,092.65
Exercised during the year 2,16,91,200 563.78
Forfeited / Lapsed during the year 35,23,700 895.09
Options outstanding, end of year 12,86,54,300 840.19
Options exercisable 4,96,81,000 661.84
ss
&OLLOWING TABLE SUMMARISES THE INFORMATION ABOUT STOCKKOPTIONS OUTSTANDING ASAAT -ARCH

Range of exercise price Number of shares Weighted average Weighted average


Plan arising life of options exercise price
(`)
out of options (in years) (`)
Plan C 680.00 to 835.50 46,44,400 2.34 690.91
Plan D 680.00 33,34,300 2.33 680.00
Plan E 468.40 to 680.00 1,50,94,600 2.18 650.01
Plan F 835.50 to 1,097.80 6,90,83,000 3.90 985.92
ss
&OLLOWING TABLE SUMMARISES THE INFORMATION ABOUT STOCKKOPTIONS OUTSTANDING ASAAT -ARCH

Range of exercise price Number of shares Weighted average Weighted average


Plan arising life of options exercise price
(`)
out of options (in years) (`)
Plan C 680.00 to 835.50 57,40,800 3.34 693.00
Plan D 680.00 51,33,900 3.32 680.00
Plan E 440.16 to 680.00 3,78,50,200 2.49 598.71
Plan F 835.50 to 1,097.80 7,99,29,400 4.80 975.41

HDFC Bank Limited Annual Report 2016-17 91


Schedules to the Financial Statements
For the year ended March 31, 2017
Fair value methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the
dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical share
prices. No stock options were granted during the year ended March 31, 2017 (previous year: 4,48,36,200). The various
assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2016 were:

Particulars March 31, 2016


Dividend yield 0.73%
Expected volatility 23.29% to 26.46%
Risk-free interest rate 7.71% to 8.07%
Expected life of the options 1 to 7 years

Impact of fair value method on net profit and Earnings Per Share (‘EPS’)
Had the compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s
net profit and earnings per share would have been as per the proforma amounts indicated below:
(` crore)

Particulars March 31, 2017 March 31, 2016


Net profit (as reported) 14,549.66 12,296.23
Add: Stock-based employee compensation expense included in net income - -
Less: Stock-based compensation expense determined under fair value based 812.75 1,265.93
method (proforma)
Net profit (proforma) 13,736.91 11,030.30
(`) (`)
Basic earnings per share (as reported) 57.18 48.84
Basic earnings per share (proforma) 53.99 43.82
Diluted earnings per share (as reported) 56.43 48.26
Diluted earnings per share (proforma) 53.28 43.29

Other liabilities
4HEH "ANK HELD CONTINGENT PROVISIONSITOWARDS STANDARD ASSETS AMOUNTING TO ` 2,392.22 crore as at
March 31, 2017 (previous year: ` 2,001.21 crore). These are included under other liabilities.

9 Provision for standard assets is made @ 0.25% for direct advances to agriculture and Small and Micro
Enterprises (SMEs) sectors, @ 1% for advances to commercial real estate sector, @ 0.75% for advances to
commercial real estate - residential housing sector, @ 5% on restructured standard advances, @ 2% until after
one year from the date on which the rates are reset at higher rates for housing loans offered at a comparatively
lower rate of interest in the first few years and @ 2% on all exposures to the wholly owned step down
subsidiaries of the overseas subsidiaries of Indian companies, sanctioned / renewed after December 31, 2015.

9 Provision towards standard advances under Strategic Debt Restructuring (SDR) scheme is made @ 15% till the
outstanding loan / facilities in the account perform satisfactorily during the ‘specified period’ (as defined in the
scheme) and @ 5% for accounts classified under special mention account “SMA-2” category, where the Bank
under consortium / multiple banking arrangement has the largest Aggregate Exposure (AE) or second largest AE
with aggregate exposure of ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or the JLF fails
to agree upon a common corrective action plan within the stipulated time frame.

9 In accordance with regulatory guidelines and based on the information made available by its customers to the
Bank, for exposures to customers who have not hedged their foreign currency exposures, provision for standard
assets is made at levels ranging up to 0.80% depending on the likely loss the entities could incur on account of
exchange rate movements.

HDFC Bank Limited Annual Report 2016-17 92


Schedules to the Financial Statements
For the year ended March 31, 2017
Provision for standard assets of overseas branches is made at higher of rates prescribed by the overseas regulator or
RBI.
For all other loans and advances including credit exposures computed as per the current marked to market values of interest
rate and foreign exchange derivative contracts, provision for standard assets is made @ 0.40%.
4HEH"ANK HASAPRESENTEDEGROSS UNREALISED GAIN ON FOREIGN
EXCHANGEGANDNDERIVATIVEECONTRACTS UNDERDOTHERHASSETS ANDN gross unrealised loss on foreign
exchange and derivative contracts under other liabilities. Accordingly, other liabilities as at March 31, 2017 include
unrealised loss on foreign exchange and derivative contracts of ` 13,880.38 crore (previous year: ` 7,524.88 crore).
Unhedged foreign currency exposure
4HEH"ANK HASAIN PLACEAAAPOLICY ANDNPROCESSCFOR MANAGING CURRENCYCINDUCEDUCREDIT RISK
4HEHCREDIT APPRAISALSMEMORANDUMD prepared at the time of origination and review of a credit is required to
discuss the exchange risk that the customer is exposed to from all sources, including trade related, foreign currency
borrowings and external commercial borrowings. It could cover the natural hedge available to the customer as well as
other hedging methods adopted by the customer to mitigate exchange risk. For foreign currency loans granted by the
Bank beyond a defined threshold the customer will be encouraged to enter into appropriate risk hedging mechanisms
with the Bank. Alternatively, the Bank will satisfy itself that the customer has the financial capacity to bear the exchange
risk in the normal course of its business and / or has other mitigants to reduce the risk. On a monthly basis, the Bank
reviews information on the unhedged portion of foreign currency exposures of customers, whose total foreign currency
exposure with the Bank exceeds a defined threshold. Based on the monthly review, the Bank proposes suitable hedging
techniques to the customer to contain the risk. A Board approved credit risk rating linked limit on unhedged foreign
currency position of customers is applicable when extending credit facilities to a customer. The compliance with the limit
is assessed by estimating the extent of drop in a customer’s annual EBID due to a potentially large adverse movement
in exchange rate impacting the unhedged foreign currency exposure of the customer. Where a breach is observed in
such a simulation, the customer is advised to reduce its unhedged exposure.
)N ACCORDANCE WITH 2")" GUIDELINES
PROVISIONSI HELD FOR STANDARD ASSETS ANDN CAPITALI MAINTAINED INCLUDING CAPITALI conservation buffer) by the Bank as
at March 31, 2017 in respect of the unhedged foreign currency exposure of customers was ` 108.31 crore (previous year: ` 114.84
crore) and ` 396.86 crore (previous year: ` 294.57 crore) respectively.

10 Investments
s 6ALUE OFEINVESTMENTS ` crore)

Particulars March 31, 2017 March 31, 2016


Gross value of investments
- In India 213,407.17 194,583.15
- Outside India 1,120.65 1,372.68
Provisions for depreciation on investments
- In India 61.85 119.54
- Outside India 2.63 -
Net value of investments
- In India 213,345.32 194,463.61
- Outside India 1,118.02 1,372.68
s -OVEMENT INNPROVISIONSIHELD TOWARDS DEPRECIATIONEON INVESTMENTS (` crore)

Particulars March 31, 2017 March 31, 2016


Opening balance 119.54 113.99
Add: Provision made during the year 37.33 36.51
Less: Write-off, write back of excess provision during the year 92.39 30.96
Closing balance 64.48 119.54

Movement in provisions held towards depreciation on investments has been reckoned on a yearly basis.

HDFC Bank Limited Annual Report 2016-17 93


Schedules to the Financial Statements
For the year ended March 31, 2017
ss 2EPO TRANSACTIONS
Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2017: (` crore)

Minimum Maximum Daily average Outstanding


Particulars outstanding outstanding outstanding as at
during the year during the year during the year March 31, 2017
Securities sold under repo
1. Corporate debt securities - - - -
2. Government securities - 32,620.54 7,445.30 -
Securities purchased under reverse repo
1. Corporate debt securities - 132.00 30.74 -
2. Government securities - 31,413.37 6,900.12 4,690.56

Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2016: (` crore)

Minimum Maximum Daily average Outstanding


Particulars outstanding outstanding outstanding as at
during the year during the year during the year March 31, 2016
Securities sold under repo
1. Corporate debt securities - - - -
2. Government securities - 32,530.40 11,097.06 31,950.52
Securities purchased under reverse repo
1. Corporate debt securities - 211.60 144.49 132.00
2. Government securities - 20,106.00 2,868.40 -

.ON
3,2
INVESTMENT PORTFOLIO
Issuer-wise composition of non-SLR investments as at March 31, 2017: (` crore)

Extent of
Sr. Extent of “below Extent of Extent of
Issuer Amount private investment “unrated” “unlisted”
No.
placement# grade” securities# * securities# **
securities#
1 Public sector undertakings 2,225.18 2,174.65 - - -
2 Financial institutions 1,400.31 1,360.00 - - -
3 Banks 700.36 - - - -
4 Private corporate 41,069.41 39,337.27 - 33.51 3,793.61
5 Subsidiaries / Joint ventures 3,843.32 3,843.32 - - -
6 Others 2,870.54 2,860.53 - - -
7 Provision held towards depreciation (64.48)
Total 52,044.64 49,575.77 - 33.51 3,793.61

Amounts reported under these columns above are not mutually exclusive.
Excludes investments in equity shares and units of equity oriented mutual funds in line with extant RBI
guidelines.
Excludes investments in equity shares, units of equity oriented mutual funds, pass through certificates, security
receipts, commercial paper and certificate of deposits in line with extant RBI guidelines.

HDFC Bank Limited Annual Report 2016-17 94


Schedules to the Financial Statements
For the year ended March 31, 2017
Issuer-wise composition of non-SLR investments as at March 31, 2016: (` crore)

Extent of
Sr. Extent of “below Extent of Extent of
Issuer Amount private investment “unrated” “unlisted”
No.
placement# grade” securities# * securities# **
securities#
1 Public sector undertakings 1,357.71 1,357.71 - - -
2 Financial institutions 4,875.28 4,775.38 - - -
3 Banks 873.92 1.00 - - -
4 Private corporate 24,911.15 23,242.35 - 83.80 431.21
5 Subsidiaries / Joint ventures 2,782.96 2,782.96 - - -
6 Others 3,493.73 3,490.73 - - -
7 Provision held towards depreciation (119.54)
Total 38,175.21 35,650.13 - 83.80 431.21

Amounts reported under these columns above are not mutually exclusive.
Excludes investments in equity shares and units of equity oriented mutual funds in line with extant RBI
guidelines.
Excludes investments in equity shares, units of equity oriented mutual funds, pass through certificates, security
receipts, commercial paper and certificate of deposits in line with extant RBI guidelines.
Non-performing non-SLR investments: (` crore)
Particulars March 31, 2017 March 31, 2016
Opening balance 87.02 101.30
Additions during the year 34.61 19.13
Reductions during the year 70.06 33.41
Closing balance 51.57 87.02
Total provisions held 38.02 84.33
ss $ETAILSAOF INVESTMENTSMCATEGORY
WISE
The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and Held
to Maturity (HTM) are as under: (` crore)
Particulars As at March 31, 2017 As at March 31, 2016
HFT AFS HTM Total HFT AFS HTM Total
Government securities 1,736.34 35,614.27 125,068.09 162,418.70 5,444.11 46,212.83 106,004.14 157,661.08
Other approved securities - - - - - - - -
Shares - 114.21 - 114.21 - 76.74 - 76.74
Debentures and bonds 1,734.61 17,550.42 1,300.00 20,585.03 1,474.90 4,282.31 500.00 6,257.21
Subsidiary / Joint ventures - - 3,843.32 3,843.32 - - 2,782.96 2,782.96
Others - 27,502.08 - 27,502.08 - 29,058.30 - 29,058.30
Total 3,470.95 80,780.98 130,211.41 214,463.34 6,919.01 79,630.18 109,287.10 195,836.29

/THERHINVESTMENTS ASNAT THEH"ALANCEA3HEETNDATE INCLUDE COMMERCIAL PAPER AMOUNTING TOA`


24,494.53 crore (previous year: ` 25,431.18 crore).
)NVESTMENTS INCLUDELSECURITIESIOF &ACEC6ALUE & 6 AGGREGATINGG` 1,520.00 crore (previous year: FV ` 1,520.00 crore) which
are kept as margin for clearing of securities, of FV ` 24,488.31 crore (previous year: FV ` 13,729.30 crore) which are kept

HDFC Bank Limited Annual Report 2016-17 95


Schedules to the Financial Statements
For the year ended March 31, 2017
as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 100.00 crore (previous
year: FV ` 56.00 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing
Corporation of India Limited (CCIL).

)NVESTMENTS INCLUDE SECURITIESIOF &6 AGGREGATING ` 16.00 crore (previous year: FV ` 16.00 crore) which are
kept as margin with National Securities Clearing Corporation of India Limited (NSCCIL), of FV aggregating ` 13.00
crore (previous year: FV ` 13.00 crore) which are kept as margin with Metropolitan Clearing Corporation of India Limited
and of FV aggregating ` 5.00 crore (previous year: ` 1.00 crore) which are kept as margin with Indian Clearing
Corporation Limited in the BSE currency derivatives segment.

)NVESTMENTS HAVING &6 AGGREGATING ` 42,730.27 crore (previous year: FV ` 35,937.22 crore) are kept as margin towards
Real Time Gross Settlement (RTGS) and those having FV aggregating ` 41,473.92 crore (previous year: ` 13,091.46
crore) are kept as margin towards repo transactions with the RBI.

)NVESTMENTS OF &6 AGGREGATING ` 11.05 crore (previous year: FV ` 10.05 crore) are kept as margin for Forex Settlement
Default Fund, of FV aggregating ` 75.40 crore (previous year: ` 85.40 crore) are kept as Cash Margin, of FV aggregating
65.00 crore (previous year: nil) are kept as margin for Securities Segment Default Fund, of FV aggregating ` 25.00 crore
(previous year: nil) are kept as margin for CBLO Segment Default Fund and of FV aggregating ` 41.00 crore (previous year:
11.00 crore) are kept as margin for Rupee Derivatives Guaranteed Settlement Default Fund with CCIL.

4HEH"ANK HASAMADE INVESTMENTS IN CERTAIN COMPANIESAWHEREINRIT HOLDSLMORE THAN ᄃ ᄃ OF


THEHEQUITY SHARES OF THOSE companies. Such investments do not fall within the definition of a joint venture as
per AS-27, Financial Reporting of Interest in Joint Ventures and the said accounting standard is thus not applicable.
However, pursuant to RBI guidelines, the Bank has classified and disclosed these investments as joint ventures.
$URINGNTHEHYEARAENDEDD-ARCHR
THEHAGGREGATE BOOK VALUEEOF INVESTMENTMSOLD FROM
OANDNTRANSFERREDRTO ᄂᄂ FROM
O(4-category was in excess of 5% of the book value of investments held in HTM category at the beginning of the year. The market
value of investments (excluding investments in subsidiaries / joint ventures and Non SLR bonds) under HTM category as at
March 31, 2017 was ` 128,886.02 crore and was higher than the book value thereof as at that date. In accordance with the
RBI guidelines, sale from, and transfer to / from, HTM category excludes the:

9 one-time transfer of the securities permitted to be undertaken by banks at the beginning of the accounting year
with approval of the Board of Directors;
9 sales to the RBI under pre-announced open market operation auctions; and
9 repurchase of Government securities by Government of India from banks.
sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM at the
beginning of January, July and September 2016, in addition to the shifting permitted at the beginning of the
accounting year, i.e, April 2016.
11 Derivatives
ss &ORWARDD2ATE !GREEMENTSG&2! E ᄂ M)NTEREST 2ATE&3WAPS )23 ` crore)

Sr. Particulars March 31, 2017 March 31, 2016


No.
i) The total notional principal of swap agreements 238,644.16 220,137.21
ii) Total losses which would be incurred if counter parties failed to fulfill 917.35 912.36
their obligations under the agreements
iii) Concentration of credit risk arising from swaps** 69.96% 83.02%
iv) Collateral required by the Bank upon entering into swaps - -
v) The fair value of the swap book 45.32 (48.40)

* Interest Rate Swaps are comprised of INR Interest Rate Swaps and FCY Interest Rate Swaps.
** Concentration of credit risk arising from swaps is with banks as at March 31, 2017 and March 31, 2016.

HDFC Bank Limited Annual Report 2016-17 96


Schedules to the Financial Statements
For the year ended March 31, 2017
The nature and terms of rupee IRS as on March 31, 2017 are set out below:

Nature Nos. Notional principal Benchmark Terms


(` crore)
Trading 6 225.00 INBMK Fixed receivable v/s floating payable
Trading 6 375.00 INBMK Floating receivable v/s fixed payable
Trading 4 1,250.00 INCMT Floating receivable v/s fixed payable
Trading 1,179 78,502.69 OIS Fixed receivable v/s floating payable
Trading 1,167 76,008.42 OIS Floating receivable v/s fixed payable
Trading 292 21,019.00 MIFOR Fixed receivable v/s floating payable
Trading 218 12,959.00 MIFOR Floating receivable v/s fixed payable
Trading 7 450 MIOIS Floating receivable v/s fixed payable
Total 190,789.11

The nature and terms of foreign currency IRS as on March 31, 2017 are set out below:

Nature Nos. Notional principal Benchmark Terms


(` crore)
Trading 1 17.80 GBP Libor Fixed receivable v/s floating payable
Trading 1 17.80 GBP Libor Floating receivable v/s fixed payable
Trading 2 692.93 EURIBOR Fixed receivable v/s floating payable
Trading 2 692.93 EURIBOR Floating receivable v/s fixed payable
Trading 110 18,404.28 USD Libor Fixed receivable v/s floating payable
Trading 194 24,786.81 USD Libor Floating receivable v/s fixed payable
Hedging 3 3,242.50 USD Libor Fixed receivable v/s floating payable
Total 47,855.05

There were no foreign currencies FRA outstanding as at March 31, 2017.

The nature and terms of rupee IRS as on March 31, 2016 are set out below:

Nature Nos. Notional principal Benchmark Terms


(` crore)
Trading 7 275.00 INBMK Fixed receivable v/s floating payable
Trading 8 450.00 INBMK Floating receivable v/s fixed payable
Trading 4 1,250.00 INCMT Floating receivable v/s fixed payable
Trading 944 67,667.84 OIS Fixed receivable v/s floating payable
Trading 901 61,759.95 OIS Floating receivable v/s fixed payable
Trading 323 23,437.00 MIFOR Fixed receivable v/s floating payable
Trading 239 15,135.00 MIFOR Floating receivable v/s fixed payable
Trading 8 620.00 MIOIS Floating receivable v/s fixed payable
Total 170,594.79

HDFC Bank Limited Annual Report 2016-17 97


Schedules to the Financial Statements
For the year ended March 31, 2017
The nature and terms of foreign currency IRS as on March 31, 2016 are set out below:

Nature Nos. Notional principal Benchmark Terms


(` crore)
Trading 1 29.41 GBP Libor Fixed receivable v/s floating payable
Trading 1 29.41 GBP Libor Floating receivable v/s fixed payable
Trading 2 753.95 EURIBOR Fixed receivable v/s floating payable
Trading 2 753.95 EURIBOR Floating receivable v/s fixed payable
Trading 90 14,568.32 USD Libor Fixed receivable v/s floating payable
Trading 184 26,816.42 USD Libor Floating receivable v/s fixed payable
Hedging 3 3,312.75 USD Libor Fixed receivable v/s floating payable
Hedging 6 2,848.97 USD Libor Floating receivable v/s fixed payable
Total 49,113.18

The nature and terms of foreign currency FRA as on March 31, 2016 are set out below:

Nature Nos. Notional principal Benchmark Terms


(` crore)
Trading 1 214.63 USD Libor Payable FRA
Trading 1 214.63 USD Libor Receivable FRA
Total 429.26

ss %XCHANGEETRADED INTEREST RATE DERIVATIVES ` crore)

Sr. Particulars March 31, 2017 March 31, 2016


No.
i) The total notional principal amount of exchange traded interest rate
derivatives undertaken during the years reported Nil Nil
ii) The total notional principal amount of exchange traded interest rate
derivatives outstanding Nil Nil
iii) The notional principal amount of exchange traded interest rate
derivatives outstanding and not ‘highly effective’ N.A. N.A.
iv) Mark-to-market value of exchange traded interest rate derivatives
outstanding and not ‘highly effective’ N.A. N.A.

1UALITATIVETDISCLOSURESUON RISK EXPOSURESIN DERIVATIVES

Overview of business and processes

Derivatives are financial instruments whose characteristics are derived from underlying assets, or from interest and
exchange rates or indices. These include forwards, swaps, futures and options. The notional amounts of financial
instruments such as foreign exchange contracts and derivatives provide a basis for comparison with instruments
recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash flows involved or the
current fair value of the instruments and, therefore, do not indicate the Bank’s exposure to credit or price risks. The
following sections outline the nature and terms of the derivative transactions generally undertaken by the Bank.

HDFC Bank Limited Annual Report 2016-17 98


Schedules to the Financial Statements
For the year ended March 31, 2017
Interest rate contracts

Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a specified period
commencing on a specified future date (the settlement date). There is no exchange of principal and settlement is
effected on the settlement date. The settlement amount is the difference between the contracted rate and the market
rate prevailing on the settlement date.

Interest rate swaps involve the exchange of interest obligations with the counterparty for a specified period without
exchanging the underlying (or notional) principal.

Interest rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. The writer of
the contract pays the amount by which the market rate exceeds or is less than the cap rate or the floor rate
respectively. A combination of interest rate caps and floors is known as an interest rate collar.

Interest rate futures are standardised interest rate derivative contracts traded on a recognised stock exchange to buy
or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a
specified future date, at a price determined at the time of the contract.

Exchange rate contracts

Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of
exchange on future date. These instruments are carried at fair value, determined based on either FEDAI rates or
market quotations.

Cross currency swaps are agreements to exchange principal amounts denominated in different currencies. Cross
currency swaps may also involve the exchange of interest payments on one specified currency for interest payments in
another specified currency for a specified period.

Currency options give the buyer, on payment of a premium, the right but not an obligation, to buy or sell specified
amounts of currency at agreed rates of exchange on or before a specified future date. Option premia paid or received
is recorded in Statement of Profit and Loss for rupee options at the expiry of the option and for foreign currency options
on the trade date.

Currency futures contract is a standardised contract traded on an exchange, to buy or sell a certain underlying asset
or an instrument at a certain date in the future, at a specified price. The underlying instrument of a currency future
contract is the rate of exchange between one unit of foreign currency and the INR.

The Bank’s derivative transactions relate to sales and trading activities. Sale activities include the structuring and
marketing of derivatives to customers to enable them to hedge their market risks (both interest rate and exchange
risks), within the framework of regulations as applicable from time to time. The Bank deals in derivatives on its own
account (trading activity) principally for the purpose of generating a profit from short term fluctuations in price or yields.
The Bank also deals in derivatives to hedge the risk embedded in some of its Balance Sheet assets or liabilities.

Constituents involved in derivative business

The Treasury front-office enters into derivative transactions with customers and inter-bank counterparties. The Bank
has an independent back-office and mid-office as per regulatory guidelines. The Bank has a credit and market risk
department that assesses various counterparty risk and market risk limits, within the risk architecture and processes of
the Bank.

HDFC Bank Limited Annual Report 2016-17 99


Schedules to the Financial Statements
For the year ended March 31, 2017
Derivative policy

The Bank has in place a policy which covers various aspects that apply to the functioning of the derivative business.
The derivative business is administered by various market risk limits such as position limits, tenor limits, sensitivity
limits, GAP limit, scenario based profit and loss limit for option portfolio and value-at-risk limits that are recommended
by the Risk Policy and Monitoring Committee (‘RPMC’) to the Board of Directors for approval. All methodologies used
to assess market and credit risks for derivative transactions are specified by the credit and market risk unit. Limits are
monitored on a daily basis by the mid-office.

The Bank has implemented a Board approved policy on Customer Suitability & Appropriateness to ensure that derivative
transactions entered into are appropriate and suitable to the customer’s nature of business / operations. Before entering into a
derivative deal with a customer, the Bank scores the customer on various risk parameters and based on the overall score level
it determines the kind of product that best suits its risk appetite and the customer’s requirements.

Classification of derivatives book

The derivative book is classified into trading and hedging book. Classification of the derivative book is made on the
basis of the definitions of the trading and hedging books specified in the RBI guidelines. The trading book is managed
within the trading limits approved by the RPMC and the Board of Directors.

Hedging policy

For derivative contracts designated as hedge, the Bank documents, at inception, the relationship between the hedging
instrument and the hedged item, the risk management objective for undertaking the hedge and the methods used to assess
the hedge effectiveness. Hedge effectiveness is ascertained at the time of inception of the hedge and periodically thereafter.
Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows of the hedged item that are
attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.

The hedging book consists of transactions to hedge Balance Sheet assets or liabilities. The tenor of hedging instrument
may be less than or equal to the tenor of underlying hedged asset or liability. Derivative contracts designated as
hedges are not marked to market unless their underlying asset or liability is marked to market. In respect of derivative
contracts that are marked to market, changes in the market value are recognised in the Statement of Profit and Loss in
the relevant period. Gain or losses arising from hedge ineffectiveness, if any, is recognised in the Statement of Profit
and Loss. Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of
reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance
Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such
forward exchange contract is amortised as expense or income over the life of the contract.

0ROVISIONING
COLLATERALAANDECREDIT RISKNMITIGATION

The Bank enters into derivative transactions with counter parties based on their business ranking and financial position.
The Bank sets up appropriate limits upon evaluating the ability of the counterparty to honour its obligations in the event
of crystallisation of the exposure. Appropriate credit covenants are stipulated where required as trigger events to call for
collaterals or terminate a transaction and contain the risk.

The Bank, at the minimum, conforms to the RBI guidelines with regard to provisioning requirements. Overdue
receivables representing crystallised positive mark-to-market value of a derivative contract are transferred to the
account of the borrower and treated as non-performing assets, if these remain unpaid for 90 days or more. Full
provision is made for the entire amount of overdue and future receivables relating to positive marked to market value of
non-performing derivative contracts.

HDFC Bank Limited Annual Report 2016-17 100


Schedules to the Financial Statements
For the year ended March 31, 2017
ss 1UANTITATIVE DISCLOSURE ONRRISK EXPOSURESIN DERIVATIVES (` crore)

Sr. Currency derivatives Interest rate derivatives


Particulars
No. March 31, 2017 March 31, 2016 March 31, 2017 March 31, 2016

1 Derivatives (notional principal amount)


a) Hedging 156.95 160.35 3,242.50 6,161.72

b) Trading 32,999.13 36,149.17 235,908.28 214,575.93

2 Marked to Market positions

a) Asset (+) 649.32 740.09 918.74 911.43

b) Liability (-) (571.42) (494.47) (857.33) (964.86)

3 Credit Exposure 2,487.65 2,114.96 2,941.53 2,355.78

4 Likely impact of one percentage change

in interest rate (100*PV01)


a) On hedging derivatives 0.08 0.09 15.79 32.24

b) On trading derivatives 25.70 35.06 19.11 30.84

5 Maximum of 100*PV01 observed during

the year
a) On hedging 0.09 0.21 43.06 44.04

b) On trading 35.47 39.41 79.70 116.25

6 Minimum of 100*PV01 observed during

the year
a) On hedging 0.02 0.02 15.79 30.02

b) On trading 21.27 0.21 19.11 30.84

The notional principal amount of foreign exchange contracts classified as hedging and trading outstanding as at March
31, 2017 amounted to ` 6,302.40 crore (previous year: ` 23,182.85 crore) and ` 463,627.74 crore (previous year: `
505,892.93 crore) respectively.

The notional principal amounts of derivatives reflect the volume of transactions outstanding as at the Balance Sheet
date and do not represent the amounts at risk.

For the purpose of this disclosure, currency derivatives include currency options purchased and sold and cross
currency interest rate swaps.

Interest rate derivatives include interest rate swaps, forward rate agreements and interest rate caps.

The Bank has computed the maximum and minimum of PV01 for the year based on the balances as at the end of
every month.

HDFC Bank Limited Annual Report 2016-17 101


Schedules to the Financial Statements
For the year ended March 31, 2017
In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI guidelines.
Credit exposure has been computed using the current exposure method which is the sum of:

the current replacement cost (marked to market value including accruals) of the contract or zero whichever is
higher; and

the Potential Future Exposure (PFE) is a product of the notional principal amount of the contract and a factor that
is based on the grid of credit conversion factors prescribed in RBI guidelines, which is applied on the basis
of the residual maturity and the type of contract.

12 Asset quality
ss -OVEMENTSEIN .0!S FUNDED U ` crore)

Particulars March 31, 2017* March 31, 2016

(i) Net NPAs to net advances 0.33% 0.28%


(ii) Movement of NPAs (Gross)

(a) Opening balance 4,392.83 3,438.38

(b) Additions (fresh NPAs) during the year 7,126.17 5,712.64

(c) Reductions during the year: 5,633.34 4,758.19

- Upgradation 1,519.42 1,377.12

- Recoveries (excluding recoveries made from upgraded accounts) 1,727.98 1,438.65

- Write-offs 2,385.94 1,942.42

(d) Closing balance 5,885.66 4,392.83

(iii) Movement of net NPAs

(a) Opening balance 1,320.37 896.28

(b) Additions during the year 2,357.87 1,968.39

(c) Reductions during the year 1,834.25 1,544.30

(d) Closing balance 1,843.99 1,320.37

(iv) Movement of provisions for NPAs (excluding provisions on standard assets)

(a) Opening balance 3,072.46 2,542.10

(b) Additions during the year 4,768.30 3,744.25

(c) Write-offs 2,385.94 1,942.42

(d) Write-back of excess provisions 1,413.15 1,271.47

(e) Closing balance 4,041.67 3,072.46

NPAs include all loans, investments and foreign exchange and derivatives that are classified as non-performing by the Bank.

HDFC Bank Limited Annual Report 2016-17 102


Schedules to the Financial Statements
For the year ended March 31, 2017
*The RBI, vide its circulars dated November 21, 2016 and December 28, 2016, had given banks, in respect of certain
eligible working capital accounts and loans of ` 1 crore or less, an additional 60 / 90 days for reckoning days past due
for classification as NPAs. Eligible accounts which were more than 90 days overdue as at March 31, 2017 have been
classified as non-performing as at that date without the Bank availing of the said dispensation. These accounts
otherwise would have been classified as NPAs subsequent to March 31, 2017.

4ECHNICAL ORAPRUDENTIAL WRITE


OFFS

Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of the
branches, but have been written-off (fully or partially) at the head office level. The financial accounting systems of the
Bank are integrated and there are no write-offs done by the Bank which remain outstanding in the books of the branches.
Movement in the stock of technically or prudentially written-off accounts is given below: (` crore)

Particulars March 31, 2017 March 31, 2016

Opening balance of technical / prudential write-offs - -


Technical / Prudential write-offs during the year - -

Recoveries made from previously technically / prudentially written-off - -

accounts during the year


Closing balance of technical / prudential write-offs - -

ss &LOATING PROVISIONS

Floating provision of ` 1,248.01 crore (previous year: ` 1,335.64 crore) have been included under “Other Liabilities”.

Movement in floating provision is given below: (` crore)

Particulars March 31, 2017 March 31, 2016

Opening balance 1,335.64 1,523.22


Provisions made during the year 25.00 115.00

Draw down made during the year (112.63) (302.58)

Closing balance 1,248.01 1,335.64

Floating provisions have been utilised as per the Board approved policy for contingencies under extraordinary circumstances
and for making specific provision for impaired accounts in accordance with the RBI guidelines / directives.

Divergence in the asset classification and provisioning

There was no divergence observed by the RBI for the financial year 2015-16 in respect of the Bank’s asset classification and
provisioning under the extant prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP).

HDFC Bank Limited Annual Report 2016-17 103


ss $ISCLOSURE ON ACCOUNTS SUBJECTEDETO RESTRUCTURINGCFOR THEHYEARRENDEDD-ARCH
HDFC Bank Limited Annual Report 2016-17

(` crore, except numbers)

StatementsFinancialthetoSchedules
Type of restructuring Under Corporate Debt Restructuring (CDR) Under Small & Medium Enterprises (SME) Others Total
Sr. Mechanism Debt Restructuring Mechanism
No. Asset Classification Standard Sub Doubtful Loss Total Standard Sub Doubtful Loss Total Standard Sub Doubtful Loss Total Standard Sub Doubtful Loss Total

201731,MarchendedyeartheFor
Details Standard Standard Standard Standard

1 Restructured No. of borrowers 2 1 7 - 10 - - - - - 2 2 5 - 9 4 3 12 - 19


accounts as
at April 1,
2016* Amount outstanding 33.60 41.65 203.56 - 278.81 - - - - - 172.46 26.69 18.70 - 217.85 206.06 68.34 222.26 - 496.66

Provision thereon 1.50 - 1.57 - 3.07 - - - - - 4.00 1.62 0.77 - 6.39 5.50 1.62 2.34 - 9.46

2 Fresh No. of borrowers - - - - - - - - - - - - - - - - - - - -


restructuring
during the
year # Amount outstanding - 0.46 - - 0.46 - - - - - - - 0.24 - 0.24 - 0.46 0.24 - 0.70

Provision thereon - - - - - - - - - - - - - - - - - - - -

3 Upgradation No. of borrowers +2 - -2 -1 - -1 - - - - - +1 - - - +1 +3 - -3 - -

to restructured
standard
category Amount outstanding 59.98 - -63.51 - -3.53 - - - - - 3.53 - - - 3.53 63.51 - -63.51 - -
during the
year
Provision thereon 0.36 - -0.87 - -0.51 - - - - - 0.51 - - - 0.51 0.87 - -0.87 - -

4 Advances No. of borrowers - - - - - - - -


not shown as
restructured
standard Amount outstanding - - - - - - - -
advances at
104

the beginning
of the next Provision thereon - - - - - - - -
year^

5 Down No. of borrowers -1 +1 - - - - - - - - - -2 +2 -3 +3 - -1 -1 -1 +3 -


gradation of
restructured
accounts Amount outstanding -13.24 +13.24 - - - - - - - - - -26.69 +18.64 +8.05 - -13.24 -13.45 18.64 8.05 -
during the
year
Provision thereon -1.00 +1.00 - - - - - - - - - -1.62 +1.45 +0.17 - -1.00 -0.62 +1.45 +0.17 -

6 Write-offs of No. of borrowers - 1 2 - 3 - - - - - 1 - - - 1 1 1 2 - 4


restructured
accounts
during the Amount outstanding 22.65 41.65 113.07 - 177.37 - - - - - 3.53 - 4.03 0.89 8.45 26.18 41.65 117.10 0.89 185.82
year ##

7 Restructured No. of borrowers 3 1 2 - 6 - - - - - 2 - 4 3 9 5 1 6 3 15


accounts as
at March 31,
2017* Amount outstanding 57.69 13.70 26.98 - 98.37 - - - - - 172.46 - 33.55 7.16 213.17 230.15 13.70 60.53 7.16 311.54

Provision thereon 2.50 1.00 0.44 - 3.94 - - - - - 0.50 - 1.44 0.15 2.09 3.00 1.00 1.88 0.15 6.03

Excludes the figures of standard restructured advances which do not attract higher provisioning or risk weight.
These are restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the year and hence need not be shown as restructured
standard advances at the beginning of the next year.
include ` 0.70 crore of additional sanction (2 accounts and provision ` 1.50 crore) to existing restructured accounts in CDR and other package.
include ` 55.91 crore (15 accounts and provision ` 4.53 crore) in existing restructured accounts by way of recovery and ` 0.05 crore (1 account) is no longer required to be reported as
restructured.
ss $ISCLOSURE ON ACCOUNTS SUBJECTEDETO RESTRUCTURINGCFOR THEHYEARRENDEDD-ARCH (` crore, except numbers)
HDFC Bank Limited Annual Report 2016-17

StatementsFinancialthetoSchedules
Type of restructuring Under Corporate Debt Restructuring (CDR) Under Small & Medium Enterprises (SME) Others Total
Mechanism Debt Restructuring Mechanism
Sr.
Asset Classification
No. Sub Sub Sub Sub

201731,MarchendedyeartheFor
Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total
Details Standard Standard Standard Standard

1 Restructured No. of borrowers 3 - 7 - 10 - - - - - 6 3 1 - 10 9 3 8 - 20


accounts as
at April 1,
2015* Amount outstanding 70.48 - 236.88 - 307.36 - - - - - 192.32 9.02 7.74 - 209.08 262.80 9.02 244.62 - 516.44

Provision thereon 2.10 - 5.78 - 7.88 - - - - - 16.02 0.23 1.34 - 17.59 18.12 0.23 7.12 - 25.47

2 Fresh No. of borrowers - - 1 - 1 - - - - - - 1 1 - 2 - 1 2 - 3


restructuring
during the
year # Amount outstanding 3.29 1.48 6.70 - 11.47 - - - - - 9.00 3.80 2.95 - 15.75 12.29 5.28 9.65 - 27.22

Provision thereon - - - - - - - - - - - 0.75 0.01 - 0.76 - 0.75 0.01 - 0.76

3 Upgradation No. of borrowers - - - - - - - - - - - - - - - - - - - -

to restructured
standard
category Amount outstanding - - - - - - - - - - - - - - - - - - - -
during the
year
Provision thereon - - - - - - - - - - - - - - - - - - - -

4 Advances No. of borrowers - - - - - - - -


not shown as
105

restructured Amount outstanding - - - - - - - -


standard
advances at
the beginning
of the next Provision thereon - - - - - - - -
year^

5 Down No. of borrowers -1 +1 - - - - - - - - -1 +1 -3 +3 - - -2 +2 -3 +3 - -


gradation of
restructured
accounts Amount outstanding -40.17 40.17 - - - - - - - - -24.74 15.72 9.02 - - -64.91 55.89 9.02 - -
during the
year
Provision thereon - - - - - - - - - - -0.81 +0.58 +0.23 - - -0.81 +0.58 +0.23 - -

6 Write-offs of No. of borrowers - - 1 - 1 - - - - - 3 - - - 3 3 - 1 - 4


restructured
accounts
during the Amount outstanding - - 40.02 - 40.02 - - - - - 4.12 1.85 1.01 - 6.98 4.12 1.85 41.03 - 47.00
year ##

7 Restructured No. of borrowers 2 1 7 - 10 - - - - - 2 2 5 - 9 4 3 12 - 19


accounts as
at March 31,
2016* Amount outstanding 33.60 41.65 203.56 - 278.81 - - - - - 172.46 26.69 18.70 - 217.85 206.06 68.34 222.26 - 496.66

Provision thereon 1.50 - 1.57 - 3.07 - - - - - 4.00 1.62 0.77 - 6.39 5.50 1.62 2.34 - 9.46

Excludes the figures of standard restructured advances which do not attract higher provisioning or risk weight.
These are restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the year and hence need not be shown as restructured standard advances at the beginning of
the next year.
include ` 14.80 crore of additional sanction (5 accounts and provision ` 6.11 crore) to existing restructured accounts in CDR and other package.
include ` 10.79 crore (10 accounts and provision ` 5.18 crore) in existing restructured accounts by way of recovery and ` 1.01 crore (2 accounts and provision ` 0.17 crore) is no longer required to be reported as restructured.
Schedules to the Financial Statements
For the year ended March 31, 2017
ss $ETAILSAOF lNANCIAL ASSETS SOLD DURING THEHYEARATO SECURITISATION ᄂ RECONSTRUCTION COMPANIESA3#3 ᄂᄂ 2# #FOR
ASSETS
RECONSTRUCTION ARE ASTUNDER (` crore)
Particulars March 31, 2017 March 31, 2016
Number of accounts - 1
Aggregate value (net of provisions) of accounts sold to SC / RC - 3.96
Aggregate considerations - 2.95
Additional consideration realised in respect of accounts transferred in earlier years - -
Aggregate gain / (loss) over net book value - (1.01)
Provision made to meet shortfall in sale of NPA - (1.01)
Amount of unamortised provision debited to ‘other reserve’ - -

s $ETAILSAOF BOOK VALUE OFEINVESTMENT INESECURITY RECEIPTSC32S IBACKEDEBYY.0!S (` crore)

SRs SRs issued SRs


issued more than issued Total
Particulars within 5 years ago more than March 31,
past but within 8 years 2017
5 years past 8 years ago
(i)Backed by NPAs sold by the Bank as underlying 195.34 0.52 - 195.86
Provision held against (i) - - - -
(ii)Backed by NPAs sold by other banks / financial 17.17 10.12 - 27.29
institutions / non-banking financial companies as underlying
Provision held against (ii) - - - -
Total 212.51 10.64 - 223.15

SRs SRs issued SRs


issued more than issued Total
Particulars within 5 years ago more than March 31,
past but within 8 years 2016
5 years past 8 years ago
(i)Backed by NPAs sold by the Bank as underlying 202.92 0.88 - 203.80
Provision held against (i) - - - -
(ii)Backed by NPAs sold by other banks / financial institutions 28.91 7.14 - 36.05
/ non-banking financial companies as underlying
Provision held against (ii) - - - -
Total 231.83 8.02 - 239.85

$URINGNTHEHYEARS ENDEDD-ARCHR
ANDN-ARCHR
NO NON
PERFORMING lNANCIAL ASSETS WERERSOLD
LEXCLUDING those sold to SC / RC.
$URINGNTHEHYEARS ENDEDD-ARCHR
ANDN-ARCHR
NO NON
PERFORMING lNANCIAL ASSETS WERERPURCHASEDHBY THEH
Bank.
3ECURITISED ASSETS AS PER BOOKS OFA306S SPONSORED BYYTHET"ANK
There are no SPVs sponsored by the Bank as at March 31, 2017 and as at March 31, 2016.
!CCOUNTS under the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on March 31, 2017: Nil

HDFC Bank Limited Annual Report 2016-17 106


Schedules to the Financial Statements
For the year ended March 31, 2017
ss $ISCLOSURE ONS3TRESSED !SSETS3
(i)Disclosures on Flexible Structuring of Existing Loans (` crore, except numbers)

Financial year No. of borrowers Amount of loans taken up Exposure weighted average duration of
ended taken up for for flexible structuring loans taken up for flexible structuring
flexible Classified as Classified Before applying After applying
structuring Standard as NPA flexible structuring flexible structuring
March 31, 2017 1 39.12* - 8 years 9.5 years
March 31, 2016 1 166.67 - 5 years 20 years #
* approval from Independent Evaluation Committee (IEC) is awaited.
#
refinancing proposed at the end of 8 years.
Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period)
(` crore, except numbers)
No. of Amount outstanding Amount outstanding as at Amount outstanding as at
accounts as at March 31, 2017 with respect to March 31, 2017 with respect to
where March 31, 2017 accounts where conversion of accounts where conversion of
SDR has debt to equity is pending debt to equity has taken place
been Classified Classified Classified Classified Classified Classified
invoked as standard as NPA as standard as NPA as standard as NPA
1 73.06 - - - 73.06* -

*of which ` 32.87 crore of loans where conversion to equity has taken place.

Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period): Nil

Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period): Nil

Details of exposures to real estate and capital market sectors, risk category-wise country exposures, factoring
EXPOSURES
SINGLE ᄂᄂ GROUPU BORROWERE EXPOSURES
UNSECUREDC ADVANCESS ANDN CONCENTRATIONT OF DEPOSITS
ADVANCES
exposures and NPAs

ss $ETAILSAOF EXPOSURESTO REAL ESTATE SECTORL

Exposure is higher of limits sanctioned or the amounts outstanding as at the year end. (` crore)
Category March 31, 2017 March 31, 2016
a) Direct exposure 65,289.89 49,428.76
(i) Residential mortgages* 42,401.22 32,245.03
(of which housing loans eligible for inclusion in priority sector advances) (18,951.24) (18,697.97)
(ii) Commercial real estate 22,877.26 17,118.59
(iii) Investments in Mortgage Backed Securities (MBS) and other securitised
exposures:
(a) Residential 11.41 65.14
(b) Commercial real estate - -
b) Indirect exposure 17,832.36 14,490.76
Fund based and non-fund based exposures on National Housing Bank 17,832.36 14,490.76
(NHB) and Housing Finance Companies (HFCs)
Total exposure to real estate sector 83,122.25 63,919.52

*includes loans purchased under the direct loan assignment route

Of the above, exposure to real estate developers as at March 31, 2017 is 0.5% (previous year: 0.5%) of total
advances.

HDFC Bank Limited Annual Report 2016-17 107


Schedules to the Financial Statements
For the year ended March 31, 2017
ss $ETAILSAOF CAPITAL MARKETAEXPOSURES
Exposure is higher of limits sanctioned or the amount outstanding as at the year end. (` crore)

Sr. Particulars March 31, 2017 March 31, 2016


No.
(i) Direct investments made in equity shares, convertible bonds, convertible
debentures and units of equity oriented mutual funds the corpus of which is not 90.97 86.50
exclusively invested in corporate debt
(ii) Advances against shares, bonds, debentures or other securities or on clean basis

to individuals for investment in shares (including IPO’s / ESOP’s), convertible bonds, 186.94 158.75
convertible debentures and units of equity oriented mutual funds
(iii) Advances for any other purposes where shares or convertible bonds or convertible 3,604.58 3,133.85

debentures or units of equity oriented mutual funds are taken as primary security
(iv) Advances for any other purposes to the extent secured by collateral security of

shares or convertible bonds or convertible debentures or units of equity oriented


mutual funds i.e. where the primary security other than shares / convertible bonds 169.59 48.31
/ convertible debentures / units of equity oriented mutual funds does not fully cover
the advances
(v) Secured and unsecured advances to stock brokers and guarantees issued on 8,165.08 6,881.17

behalf of stock brokers and market makers


(vi) Loans sanctioned to corporates against the security of shares / bonds /

debentures or other securities or on clean basis for meeting promoter’s 1,390.31 2,576.32
contribution to the equity of new companies in anticipation of raising resources
(vii) Bridge loans to companies against expected equity flows / issues - -

(viii) Underwriting commitments taken up in respect of primary issue of shares or - -

convertible bonds or convertible debentures or units of equity oriented mutual funds


(ix) Financing to stock brokers for margin trading - -

(x) All exposures to venture capital funds (both registered and unregistered) 0.25 0.20

Total exposure to capital market 13,607.72 12,885.10

ss $ETAILSAOF RISK CATEGORYYWISE COUNTRYYEXPOSURES ` crore)

Risk Category March 31, 2017 March 31, 2016


Exposure (net) Provision held Exposure (net) Provision held
Insignificant 17,177.70 - 13,857.28 -
Low 9,653.78 - 8,222.23 -
Moderately low 247.75 - 370.13 -
Moderate 164.44 - 143.82 -
Moderately high 9.48 - 20.23 -
High - - 5.25 -
Very high - - - -
Total 27,253.15 - 22,618.94 -

HDFC Bank Limited Annual Report 2016-17 108


Schedules to the Financial Statements
For the year ended March 31, 2017
$ETAILSAOF FACTORING EXPOSURES
The factoring exposure of the Bank as at March 31, 2017 is ` 2,036.11 crore (previous year: ` 3,515.98 crore).
$ETAILSAOF 3INGLEO"ORROWERE,IMIT,3',
'ROUPU"ORROWERE,IMIT,'", "EXCEEDEDEBYYTHET"ANK
The RBI has prescribed single and group borrower exposure limits linked to a Bank’s capital funds and such limits can
be enhanced by a further 5 percent thereof with the approval of the Board of Directors of the Bank. During the year
ended March 31, 2017 and March 31, 2016 the Bank was within the limits prescribed by the RBI.
5NSECUREDCADVANCES
Advances for which intangible collaterals such as rights, licenses, authority etc. are charged in favour of the Bank in respect of
projects financed by the Bank, are reckoned as unsecured advances under Schedule 9 of the Balance Sheet in line with
extant RBI guidelines. There are no such advances outstanding as at March 31, 2017 (previous year: Nil).

ss )NTER
BANKA0ARTICIPATION WITHIRISK SHARING
The aggregate amount of participation issued by the Bank and reduced from advances as per regulatory guidelines as
at March 31, 2017 was ` 7,500.00 crore (previous year: ` 6,450.00 crore).
ss #ONCENTRATIONTOF DEPOSITS ADVANCES EXPOSURES AND .0!S
a) Concentration of deposits (` crore)

Particulars March 31, 2017 March 31, 2016


Total deposits of twenty largest depositors 35,562.76 28,890.12
Percentage of deposits of twenty largest depositors to total deposits 5.5% 5.3%

of the Bank
b) Concentration of advances (` crore)

Particulars March 31, 2017 March 31, 2016


Total advances to twenty largest borrowers 83,962.09 81,781.38
Percentage of advances of twenty largest borrowers to total 9.4% 11.9%

advances of the Bank

Advances comprise credit exposure (funded and non-funded credit limits) including derivative transactions
computed as per current exposure method in accordance with RBI guidelines.
c)Concentration of exposure (` crore)

Particulars March 31, 2017 March 31, 2016


Total exposure to twenty largest borrowers / customers 90,046.09 89,137.40
Percentage of exposure of twenty largest borrowers / customers to 9.5% 12.3%

total exposure of the Bank on borrowers / customers

Exposures comprise credit exposure (funded and non-funded credit limits) including derivative transactions and
investment exposure in accordance with RBI guidelines.
d)Concentration of NPAs (` crore)

Particulars March 31, 2017 March 31, 2016


Total gross exposure to top four NPA accounts 588.99 497.16

HDFC Bank Limited Annual Report 2016-17 109


Schedules to the Financial Statements
For the year ended March 31, 2017
e)Sector-wise advances (` crore)

Sr. Sector March 31, 2017 March 31, 2016


No. Outstanding Gross non- Percentage Outstanding Gross Percentage of
total performing of gross total non- gross
advances loans non-performing advances performing non-performing
loans to total loans loans to total
advances in advances in
that sector that sector
A Priority sector
1 Agriculture and allied activities 63,186.16 1,279.98 2.03% 52,867.24 764.18 1.45%
2 Advances to industries eligible 26,209.92 480.78 1.83% 24,059.96 386.90 1.61%
as priority sector lending
3 Services 52,361.67 678.46 1.30% 44,202.22 431.43 0.98%
4 Personal loans 22,350.27 14.43 0.06% 21,730.26 79.58 0.37%
Sub-total (A) 164,108.02 2,453.65 1.50% 142,859.68 1,662.09 1.16%
B Non Priority sector
1 Agriculture and allied activities 6,905.78 74.89 1.08% 7,303.08 85.77 1.17%
2 Industry 127,366.08 1,243.07 0.98% 98,854.02 793.83 0.80%
3 Services 127,937.51 1,037.87 0.81% 104,002.56 967.17 0.93%
4 Personal loans 132,249.25 1,016.40 0.77% 114,560.04 788.74 0.69%
Sub-total (B) 394,458.62 3,372.23 0.85% 324,719.70 2,635.51 0.81%
Total (A) + (B) 558,566.64 5,825.88 1.04% 467,579.38 4,297.60 0.92%

ss $ETAILSAOF 0RIORITYF3ECTOR ,ENDING #ERTIlCATES 03,#S ` crore)

Type of PSLCs For the year ended March 31, 2017


PSLC bought during the year PSLC sold during the year
Agriculture - 500.00
Small and Marginal farmers 3,269.50 21.25
Micro Enterprises - -
General - 1,000.00
Total 3,269.50 1,521.25

14 Other fixed assets


Other fixed assets includes amount capitalised relating to software having useful life of five years. Details regarding the same
are tabulated below: (` crore)

Particulars March 31, 2017 March 31, 2016


Cost
As at March 31 of the previous year 1,737.09 1,575.65
Additions during the year 402.61 161.45
Deductions during the year - (0.01)
Total (a) 2,139.70 1,737.09

HDFC Bank Limited Annual Report 2016-17 110


Schedules to the Financial Statements
For the year ended March 31, 2017
(` crore)
Particulars March 31, 2017 March 31, 2016
Depreciation
As at March 31 of the previous year 1,218.53 1,022.83
Charge for the year 255.23 195.71
On deductions during the year - (0.01)
Total (b) 1,473.76 1,218.53
Net value (a-b) 665.94 518.56

Other assets

ss/THERHASSETS INCLUDELDEFERREDRTAXAASSETSNET EOF ` 2,447.34 crore (previous year: ` 2,116.62 crore). The break-up of the
same is as follows: (` crore)

Particulars March 31, 2017 March 31, 2016

$EFERREDRTAXAASSETSARISINGSOUTUOF
Loan loss provisions 2,079.97 1,748.18
Employee benefits 167.38 148.17

Others 321.47 314.12

Total (a) 2,568.82 2,210.47

$EFERREDRTAXALIABILITYIARISINGSOUTUOF

Depreciation (121.48) (93.85)


Total (b) (121.48) (93.85)

Deferred tax asset (net) (a-b) 2,447.34 2,116.62

ss +EYYITEMSTUNDERS/THERS INR/THER/ASSETS ARE AS UNDER (` crore)

Particulars March 31, 2017 March 31, 2016


Deposit with NABARD / SIDBI / NHB - PSL shortfall 11,882.37 13,719.68
Unrealised gain on foreign exchange and derivative contracts* 14,014.05 8,566.14

Deferred tax assets 2,447.34 2,116.62

Deposits & amounts paid in advance 1,740.75 1,282.19

Accounts receivable 1,568.79 1,274.66

Margin for LAF with RBI - 1,344.51

Residual items 2.50 2.41

Total 31,655.80 28,306.21

*The Bank has presented gross unrealised gain on foreign exchange and derivative contracts under other assets and
gross unrealised loss on foreign exchange and derivative contracts under other liabilities.

HDFC Bank Limited Annual Report 2016-17 111


16 Maturity pattern of key assets and liabilities
HDFC Bank Limited Annual Report 2016-17

Assets and liabilities are classified in the maturity buckets as per the guidelines issued by the RBI. (` crore)

StatementsFinancialthetoSchedules
As at March 2 to 7 8 to 14 15 to 30 31 days 2 months Over 3 Over 6 Over 1 Over 3 Over

201731,MarchendedyeartheFor
1 day to to months to months to year to years to Total
31, 2017 days days days 5 years
2 months 3 months 6 months 1 year 3 years 5 years
Loans & 6,539.06 15,084.56 9,469.18 23,487.16 23,100.12 22,790.90 44,683.49 63,909.96 246,074.88 55,114.69 44,314.20 554,568.20
advances
Investments 41,394.34 5,785.29 5,563.97 8,019.55 10,862.06 10,667.74 13,380.35 20,057.43 60,186.46 7,944.59 30,601.56 214,463.34

Deposits 10,336.50 26,933.57 16,982.56 14,231.55 23,725.46 23,778.34 43,975.61 69,790.72 287,584.72 13,494.82 112,805.81 643,639.66

Borrowings 313.31 3,248.71 1,622.08 3,545.16 5,072.85 2,588.29 6,431.74 16,178.33 12,543.50 6,319.90 16,165.00 74,028.87

Foreign

currency 4,588.42 9,521.48 2,432.05 5,393.34 3,493.54 3,532.92 4,448.81 3,636.09 4,247.19 1,724.90 303.32 43,322.06
assets
Foreign

currency 1,595.20 2,863.76 2,144.67 4,356.23 5,713.99 3,212.35 4,487.00 7,486.47 11,400.66 1,784.51 1,231.75 46,276.59
liabilities

(` crore)
112

As at March 2 to 7 8 to 14 15 to 30 31 days 2 months Over 3 Over 6 Over 1 Over 3 Over


1 day to to months to months to year to years to Total
31, 2016 days days days 5 years
2 months 3 months 6 months 1 year 3 years 5 years
Loans & 5,899.80 9,363.35 6,715.02 20,239.90 22,687.23 20,790.59 34,648.74 61,882.67 207,986.19 40,680.30 33,700.17 464,593.96
advances
Investments 14,316.76 39,302.30 6,909.17 12,010.84 13,677.05 8,799.02 11,515.93 13,973.17 45,249.83 3,515.43 26,566.79 195,836.29

Deposits 7,833.76 24,410.58 14,502.58 12,873.38 18,947.05 17,868.01 39,301.81 78,240.13 222,890.76 12,361.51 97,194.62 546,424.19

Borrowings 42.51 34,044.93 1,253.61 2,669.86 5,693.61 2,648.99 3,960.08 10,046.25 8,977.05 1,767.55 13,864.55 84,968.99

Foreign

currency 3,613.68 5,965.52 2,006.00 6,326.41 4,309.81 3,188.70 5,275.05 15,829.01 5,571.21 1,326.15 603.60 54,015.14
assets
Foreign

currency 828.63 1,429.21 1,553.38 3,620.26 6,334.19 3,127.67 6,554.33 35,293.92 14,418.24 1,290.48 719.14 75,169.45
liabilities

Classification of assets and liabilities under the different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the return submitted to
the RBI. Maturity profile of foreign currency assets and liabilities is excluding Off Balance Sheet item.
Schedules to the Financial Statements
For the year ended March 31, 2017
Provisions, contingent liabilities and contingent assets
Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the Bank.

a) Provision for credit card and debit card reward points (` crore)

Particulars March 31, 2017 March 31, 2016


Opening provision for reward points 306.36 200.07
Provision for reward points made during the year 334.24 179.50
Utilisation / write-back of provision for reward points (209.36) (73.21)
Closing provision for reward points 431.24 306.36

b) Provision for legal and other contingencies (` crore)

Particulars March 31, 2017 March 31, 2016


Opening provision 344.56 354.91
Movement during the year (net) (32.66) (10.35)

Closing provision 311.90 344.56

c) Provision pertaining to fraud accounts

Particulars March 31, 2017


No. of frauds reported during the year 2,319
Amount involved in fraud (` crore) 165.20
Amount involved in fraud net of recoveries / write-offs as at the end of the year (` crore) 20.83
Provisions held as at the end of the year (` crore) 20.83
Amount of unamortised provision debited from “other reserves” as at the end of the year (` crore) -
d) Description of contingent liabilities

Sr. No. Contingent liability* Brief description

1 Claims against the Bank The Bank is a party to various taxation matters in respect of which appeals are pending. The Bank
not acknowledged as expects the outcome of the appeals to be favorable based on decisions on similar issues in the
debts - taxation previous years by the appellate authorities, based on the facts of the case and the provisions of
Income Tax Act, 1961.
2 Claims against the Bank The Bank is a party to various legal proceedings in the normal course of business. The Bank does
not acknowledged as not expect the outcome of these proceedings to have a material adverse effect on the Bank’s
debts - others financial conditions, results of operations or cash flows.
3 Liability on account of The Bank enters into foreign exchange contracts, currency options, forward rate agreements,
forward exchange and currency swaps and interest rate swaps with inter-bank participants on its own account and for
derivative contracts customers. Forward exchange contracts are commitments to buy or sell foreign currency at a
future date at the contracted rate. Currency swaps are commitments to exchange cash flows by
way of interest / principal in one currency against another, based on predetermined rates. Interest
rate swaps are commitments to exchange fixed and floating interest rate cash flows. The notional
amounts of financial instruments such as foreign exchange contracts and derivatives provide a
basis for comparison with instruments recognised on the Balance Sheet but do not necessarily
indicate the amounts of future cash flows involved or the current fair value of the instruments and,
therefore, do not indicate the Bank’s exposure to credit or price risks. The derivative instruments
become favorable (assets) or unfavorable (liabilities) as a result of fluctuations in market rates or
prices relative to their terms.

HDFC Bank Limited Annual Report 2016-17 113


Schedules to the Financial Statements
For the year ended March 31, 2017
Sr. No. Contingent liability* Brief description

4 Guarantees given on As a part of its commercial banking activities, the Bank issues documentary credit and guarantees
behalf of constituents, on behalf of its customers. Documentary credits such as letters of credit enhance the credit
acceptances, standing of the Bank’s customers. Guarantees generally represent irrevocable assurances that the
endorsements and Bank will make payments in the event of the customer failing to fulfill its financial or performance
other obligations obligations.
5 Other items for which the These include: a) Credit enhancements in respect of securitised-out loans; b) Bills rediscounted by
Bank is contingently liable the Bank; c) Capital commitments; d) Underwriting commitments; e) Investment purchases pending
settlement; f) Amount transferred to the RBI under the Depositor Education and Awareness Fund
(DEAF).

*Also refer Schedule 12 - Contingent liabilities


"USINESS RATIOSS ᄂ INFORMATION

Particulars March 31, 2017 March 31, 2016


1
Interest income as a percentage to working funds 8.95% 9.25%
Net interest income as a percentage to working funds 4.28% 4.24%
Non-interest income as a percentage to working funds 1.59% 1.65%
Operating profit2 as a percentage to working funds 3.32% 3.28%
Return on assets (average) 1.88% 1.89%
Business3 per employee (` in crore) 12.36 11.39
Profit per employee4 (` in crore) 0.16 0.15
5
Gross non-performing assets to gross advances 1.05% 0.94%
Gross non-performing advances to gross advances 1.04% 0.92%
Percentage of net non-performing assets6 to net advances7 0.33% 0.28%
Provision coverage ratio8 68.67% 69.94%

Definitions of certain items in Business ratios / information:


Working funds is the daily average of total assets during the year.
Operating profit is net profit for the year before provisions and contingencies and profit / (loss) on sale of building and other
assets (net).
“Business” is the total of average of net advances and deposits (net of inter-bank deposits).
Productivity ratios are based on average employee numbers.
Gross advances are net of bills rediscounted and interest in suspense.
Net NPAs are non-performing assets net of interest in suspense, specific provisions, ECGC claims received, provisions for
funded interest term loans classified as NPAs and provisions in lieu of diminution in the fair value of restructured assets
classified as NPAs.
Net advances are equivalent to gross advances net of specific loan loss provisions, ECGC claims received, provision for
funded interest term loans classified as NPA and provisions in lieu of diminution in the fair value of restructured assets.
Provision coverage ratio does not include assets written off.

Interest income

Interest income under the sub-head Income from Investments includes dividend received during the year ended March 31,
2017 on units of mutual funds, equity and preference shares amounting to ` 256.64 crore (previous year: ` 182.03 crore).

HDFC Bank Limited Annual Report 2016-17 114


Schedules to the Financial Statements
For the year ended March 31, 2017
Earnings from standard assets securitised-out

There are no Special Purpose Vehicles (‘SPV’s) sponsored by the Bank for securitisation transactions. During the years
ended March 31, 2017 and March 31, 2016, there were no standard assets securitised-out by the Bank.

Form and quantum of services and liquidity provided by way of credit enhancement

The Bank has provided credit and liquidity enhancements in the form of cash collaterals / guarantees / subordination of cash
flows etc., to the senior Pass Through Certificates (‘PTC’s) as well as at loan assignment transactions. The RBI issued
addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly, the Bank does not
provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to these guidelines.
The total value of credit enhancement outstanding in the books as at March 31, 2017 was ` 224.31 crore (previous year: `
225.65 crore) and outstanding servicing liability was ` 0.07 crore (previous year: ` 0.10 crore).

Other income

ss #OMMISSION
EXCHANGEEANDABROKERAGEEINCOME

Commission, exchange and brokerage income is net of correspondent bank charges.

9 Commission income for the year ended March 31, 2017 includes fees of ` 798.35 crore (previous year:
661.75 crore) in respect of life insurance business and ` 157.58 crore (previous year: ` 156.13 crore) in respect of
general insurance business.

-ISCELLANEOUSLINCOME

Miscellaneous income includes recoveries from written-off accounts amounting to ` 864.31 crore (previous year:
807.99 crore).

Other expenditure

Other expenditure includes commission paid to sales agents amounting to ` 1,906.80 crore (previous year: ` 1,671.88 crore),
exceeding 1% of the total income of the Bank.

Provisions and contingencies

The break-up of provisions and contingencies included in the Statement of Profit and Loss is given below: (` crore)

Particulars March 31, 2017 March 31, 2016


Provision for income tax
- Current 7,916.97 6,507.59

- Deferred (327.54) (165.88)

Provision for NPAs 3,145.30 2,133.63

Provision for diminution in value of non-performing investments (7.64) 15.17

Provision for standard assets 392.18 440.00

Other provisions and contingencies* 63.46 136.81

Total 11,182.73 9,067.32

*Includes provisions for tax, legal and other contingencies ` 38.34 crore (previous year: ` 37.28 crore), floating provisions
25.00 crore (previous year: ` 115.00 crore), provisions / (write-back) for securitised-out assets ` 2.62 crore (previous year:
(2.85) crore) and standard restructured assets ` (2.50) crore (previous year: ` (12.62) crore).

HDFC Bank Limited Annual Report 2016-17 115


Schedules to the Financial Statements
For the year ended March 31, 2017
24 Employee benefits
Gratuity (` crore)

Particulars March 31, 2017 March 31, 2016


Reconciliation of opening and closing balance of the present value of
the defined benefit obligation
Present value of obligation as at April 1 390.47 310.59
Interest cost 26.36 22.38
Current service cost 62.57 53.78
Benefits paid (38.49) (24.30)
Actuarial (gain) / loss on obligation:
Experience adjustment 35.48 16.24
Assumption change 11.61 11.78
Present value of obligation as at March 31 488.00 390.47
Reconciliation of opening and closing balance of the fair value of the
plan assets
Fair value of plan assets as at April 1 287.93 242.88
Expected return on plan assets 22.52 21.23
Contributions 47.95 61.81
Benefits paid (38.49) (24.30)
Actuarial gain / (loss) on plan assets:
Experience adjustment 32.44 (13.69)
Assumption change 3.22 -
Fair value of plan assets as at March 31 355.57 287.93
Amount recognised in Balance Sheet
Fair value of plan assets as at March 31 355.57 287.93
Present value of obligation as at March 31 (488.00) (390.47)
!SSETS ᄂ ELIABILITY LAS ATB-ARCHH (132.43) (102.54)
Expenses recognised in Statement of Profit and Loss
Interest cost 26.36 22.38
Current service cost 62.57 53.78
Expected return on plan assets (22.52) (21.23)
Net actuarial (gain) / loss recognised in the year 11.42 41.71
Net cost 77.83 96.64
Actual return on plan assets 58.18 7.54
Estimated contribution for the next year 73.21 47.95
Assumptions
Discount rate 7.1% per annum 7.5% per annum
Expected return on plan assets 7.0% per annum 8.0% per annum
Salary escalation rate 8.0% per annum 8.0% per annum

HDFC Bank Limited Annual Report 2016-17 116


Schedules to the Financial Statements
For the year ended March 31, 2017
Experience adjustment (` crore)

Particulars Years ended March 31,


2017 2016 2015 2014 2013
Plan assets 355.57 287.93 242.88 172.60 130.22
Defined benefit obligation 488.00 390.47 310.59 237.43 206.28
Surplus / (deficit) (132.43) (102.54) (67.71) (64.83) (76.06)
Experience adjustment gain / (loss) on plan assets 32.44 (13.69) 21.35 1.87 2.00
Experience adjustment (gain) / loss on plan liabilities 35.48 16.24 4.59 5.87 2.72

Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the
year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as
of March 31, 2017 are given below:

Category of plan assets % of fair value to total plan assets


as at March 31, 2017

Government securities 28.0%


Debenture and bonds 27.0%
Equity shares 40.8%
Others 4.2%
Total 100.0%

Pension (` crore)
Particulars March 31, 2017 March 31, 2016
Reconciliation of opening and closing balance of the present value of
the defined benefit obligation
Present value of obligation as at April 1 70.88 57.45
Interest cost 4.80 3.92
Current service cost 1.23 1.12
Benefits paid (6.62) (10.18)
Actuarial (gain) / loss on obligation:
Experience adjustment 4.65 17.35
Assumption change (1.39) 1.22
Present value of obligation as at March 31 73.55 70.88
Reconciliation of opening and closing balance of the fair value of the plan
assets
Fair value of plan assets as at April 1 38.38 41.91
Expected return on plan assets 2.61 3.21
Contributions 1.03 2.01
Benefits paid (6.62) (10.18)
Actuarial gain / (loss) on plan assets:
Experience adjustment 0.39 1.43

HDFC Bank Limited Annual Report 2016-17 117


Schedules to the Financial Statements
For the year ended March 31, 2017
(` crore)
Particulars March 31, 2017 March 31, 2016
Assumption change 0.37 -
Fair value of plan assets as at March 31 36.16 38.38
Amount recognised in Balance Sheet
Fair value of plan assets as at March 31 36.16 38.38
Present value of obligation as at March 31 (73.55) (70.88)
Asset / (liability) as at March 31 (37.39) (32.50)
Expenses recognised in Statement of Profit and Loss
Interest cost 4.80 3.92
Current service cost 1.23 1.12
Expected return on plan assets (2.61) (3.21)
Net actuarial (gain) / loss recognised in the year 2.50 17.14
Net cost 5.92 18.97
Actual return on plan assets 3.37 4.64
Estimated contribution for the next year 7.18 14.00
Assumptions
Discount rate 7.1% per annum 7.5% per annum
Expected return on plan assets 7.0% per annum 8.0% per annum
Salary escalation rate 8.0% per annum 8.0% per annum

Experience adjustment (` crore)

Particulars Years ended March 31,


2017 2016 2015 2014 2013
Plan assets 36.16 38.38 41.91 47.99 48.88
Defined benefit obligation 73.55 70.88 57.45 58.89 58.19
Surplus / (deficit) (37.39) (32.50) (15.54) (10.90) (9.31)
Experience adjustment gain / (loss) on plan assets 0.39 1.43 (2.38) 3.45 (1.58)
Experience adjustment (gain) / loss on plan liabilities 4.65 17.35 (0.19) 3.62 6.12

Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the
year with regard to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as
of March 31, 2017 are given below:
Category of plan assets % of fair value to total plan assets
as at March 31, 2017
Government securities 6.9%
Debenture and bonds 87.7%
Others 5.4%
Total 100.0%

HDFC Bank Limited Annual Report 2016-17 118


Schedules to the Financial Statements
For the year ended March 31, 2017
Provident fund

The guidance note on AS-15, Employee Benefits, states that employer established provident funds, where interest is guaranteed
are to be considered as defined benefit plans and the liability has to be valued. The Institute of Actuaries of India (IAI) has issued a
guidance note on valuation of interest rate guarantees on exempt provident funds. The actuary has accordingly valued the same
and the Bank held a provision of Nil as at March 31, 2017 (previous year: Nil), towards the present value of the guaranteed interest
benefit obligation. The actuary has followed deterministic approach as prescribed by the guidance note.

Assumptions
Particulars March 31, 2017 March 31, 2016
Discount rate (GOI security yield) 7.1% per annum 7.5% per annum
Expected guaranteed interest rate 8.7% per annum 9.0% per annum

The Bank does not have any unfunded defined benefit plan. The Bank contributed ` 216.86 crore (previous year: ` 189.00
crore) to the provident fund and ` 78.67 crore (previous year: ` 56.54 crore) to the superannuation plan.

Compensated absences

The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Bank is
given below: (` crore)
Particulars March 31, 2017 March 31, 2016
Privileged leave 237.24 222.07
Sick leave 52.95 47.40
Total actuarial liability 290.19 269.47
Assumptions
Discount rate 7.1% per annum 7.5% per annum
Salary escalation rate 8.0% per annum 8.0% per annum

Disclosures on remuneration
1UALITATIVET$ISCLOSURES
Information relating to the bodies that oversee remuneration
Name and composition
The Board of Directors of the Bank has constituted the Nomination and Remuneration Committee (hereinafter, the
‘NRC’) for overseeing and governing the compensation policies of the Bank. The NRC is comprised of four independent
directors and is chaired by the Board of Directors of the Bank. Further, two members of the NRC are also members of
the Risk Policy and Monitoring Committee (hereinafter, the ‘RPMC’) of the Board.
The NRC is comprised of the Chairperson, Mrs. Shyamala Gopinath, Mr. A N Roy, Mr. Partho Datta and Mr. Bobby
Parikh. Further, Mrs. Shyamala Gopinath and Mr. Partho Dutta are also members of the RPMC. Mr. Bobby Parikh is the
chairperson of the NRC.
Mandate of the NRC
The primary mandate of the NRC is to oversee the implementation of compensation policies of the Bank.
The NRC periodically reviews the overall compensation policy of the Bank with a view to attract, retain and motivate
employees. In this capacity it is required to review and approve the design of the total compensation framework,
including compensation strategy programs and plans, on behalf of the Board of Directors. The compensation structure
and pay revision for Whole Time Directors is also approved by the NRC. The NRC co-ordinates with the RPMC to
ensure that compensation is aligned with prudent risk taking.

HDFC Bank Limited Annual Report 2016-17 119


Schedules to the Financial Statements
For the year ended March 31, 2017
External Consultants
The Bank employed the services of the following consulting firms in the area of compensation and benefits and human
resources.
!/. The Bank employed the services of AON in the area of compensation market benchmarking and executive
compensation. AON, apart from being a globally reputed consulting firm, has the longest running year on year banking
study in India and was found to be the most appropriate by the NRC.
%RNSTNANDN9OUNG The Bank employed the services of Ernst and Young to review the compensation policy of the
Bank in light of the best in class practices in the banking industry.
3COPEOOF THE "ANK
SS2EMUNERATIONA0OLICY
The Remuneration Policy of the Bank includes within its scope all business lines, all permanent staff in its domestic as
well as international offices. Further the principles articulated in the compensation policy are universal, however in the
event there are any statutory provisions in overseas locations the same shall take precedence over the remuneration
policy of the Bank.
All permanent employees of the Bank except those covered under the long term wage agreement are covered by the
said compensation policy. The number of employees covered under the compensation policy was 84,041as at March
31, 2017 (previous year: 87,263).
"
)NFORMATION RELATING TO THE DESIGN AND STRUCTURE OFSREMUNERATION PROCESSESSANDETHE
KEYYFEATURESUANDEOBJECTIVES of remuneration policy
)
+EYY&EATURES AND /BJECTIVESNOF 2EMUNERATIONA0OLICY

The Bank’s Compensation Policy (the ‘Policy’) is aligned to business strategy, market dynamics, internal
characteristics and complexities within the Bank. The ultimate objective of the Policy is to provide a fair and
transparent structure that helps in acquiring and retaining the talent pool critical to build competitive advantage
and brand equity. The Policy has been designed basis the principles for sound compensation practices in
accordance with regulatory requirements and provides a framework to create, modify and maintain appropriate
compensation programs and processes with adequate supervision and control.
The Bank’s performance management system provides a sound basis for assessing employee performance
holistically. The Bank’s compensation framework is aligned with the performance management system and
differentiates pay appropriately amongst its employees based on degree of contribution, skill and availability of
talent owing to competitive market forces by taking into account factors such as role, skills, competencies,
experience and grade / seniority.
The NRC reviews the following critical principles enunciated in the policy and ensures that:
the compensation is adjusted for all types of prudent risk taking;
compensation outcomes are symmetric with risk outcomes;
compensation payouts are sensitive to the time horizon of risk; and
the mix of cash, equity and other forms of compensation are aligned with risk.
II.Design and Structure of Remuneration
Fixed Pay
The NRC ensures that the fixed component of the compensation is reasonable, taking into account all
relevant factors including industry practice.
Elements of Fixed Pay
The fixed pay component of the Bank’s compensation structure typically consists of elements such as base salary,
allowances, perquisites, retirement and other employee benefits. Perquisites extended are in the nature of
company car, hard furnishing, company leased accommodation, club membership and such other benefits or
allowances in lieu of such perquisites / benefits. Retirement benefits include contributions to provident fund,
superannuation fund (for certain job bands) and gratuity. The Whole Time Directors of the Bank are entitled

HDFC Bank Limited Annual Report 2016-17 120


Schedules to the Financial Statements
For the year ended March 31, 2017
to other post-retirement benefits such as car and medical facilities, in accordance with specified terms of
employment as per the policy of the Bank, subject to RBI approval. The Bank also provides pension to certain
employees of the erstwhile Lord Krishna Bank (eLKB) under the Indian Banks’ Association (‘IBA’) structure.
Determinants of Fixed Pay
The fixed pay is primarily determined by taking into account factors such as the job size, performance,
experience, location, market competitiveness of pay and is designed to meet the following key objectives of:
fair compensation given the role complexity and size;
fair compensation given the individual’s skill, competence, experience and market pay position;
sufficient contribution to post retirement benefits; and
compliance with all statutory obligations.
For Whole Time Directors additional dimensions such as prominence of leadership among industry leaders,
consistency of the Bank’s performance over the years on key parameters such as profitability, growth and
asset quality in relation to its own past performance and that of its peer banks would be considered. The
quantum of fixed pay for Whole Time Directors is approved by the NRC as well as the Board and is subject
to the approval of the RBI.
6ARIABLE 0AY
The performance management system forms the basis for variable pay allocation of the Bank. The Bank
ensures that the performance management system is comprehensive and considers both, quantitative and
qualitative performance measures.
Whole Time Directors
The bonus for Whole Time Directors will not exceed 70% of the fixed pay in a year, thereby ensuring that
there is a balance between the fixed and variable pays. The variable pay for Whole Time Directors is
approved by the NRC as well as the Board and is subject to the approval of the RBI. The variable pay
component is paid out subject to the following conditions:
7HEREE THEH VARIABLE PAYY CONSTITUTESI ᄃ OR MORE OF THEH lXED PAY
A PORTION OF THEH SAME WOULD BE deferred as per the schedule mentioned in the table below:
0ORTION OFN6ARIABLE 0AY Timelines
60% Payable effective April 1 of the financial year immediately following the
performance year.
13.33% Payable effective April 1 of the second financial year following the reference
performance year.
13.33% Payable effective April 1 of the third financial year following the reference
performance year.
13.33% Payable effective April 1 of the fourth financial year following the reference
performance year.
4HEH"ANK HASADEVISEDSAPPROPRIATE MALUSLANDNCLAWWBACKKCLAUSESUAS AARISKSMITIGANT FOR
ANYYNEGATIVEE contributions of the Bank and / or relevant line of business in any year. Under the malus clause
the incumbent foregoes the vesting of the deferred variable pay in full or in part. Under the claw back clause the
incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant
performance year. The deferred bonus is paid out post review and approval by the NRC.
Employees other than Whole Time Directors
The Bank has formulated the following variable pay plans:
!NNUALABONUS PLANP
The quantum of variable payout is a function of the performance of the Bank, performance of the
business unit, performance of the individual employee, job band of the employee and the functional
category. Basis these key determinants and due adjustment for risk alignment, a payout matrix for

HDFC Bank Limited Annual Report 2016-17 121


Schedules to the Financial Statements
For the year ended March 31, 2017
variable pay is developed. Market trends for specific businesses / functions along with inputs from
compensation surveys may also be used in finalising the payout.
Bonus pools are designed to meet specific business needs therefore resulting in differentiation in both
the quantum and the method of payout across functions. Typically higher levels of responsibility
receive a higher proportion of variable pay vis-à-vis fixed pay. The Bank ensures that the time horizon
for risk is assessed and the deferment period, if any, for bonus is set accordingly. Employees on the
annual bonus plan are not part of performance-linked plans. The following is taken into account while
administering the annual bonus:
In the event the proportion of variable pay to fixed pay is substantially high (variable pay exceeding
50% of fixed pay), the Bank may devise an appropriate deferment schedule after taking into
consideration the nature of risk, time horizon of risk, and the materiality of risk.
In cases of deferment of variable pay the Bank makes an assessment prior to the due date for
payment of the deferred portion for any negative contribution. The criteria for negative
contribution are decided basis pre-defined financial benchmarks. The Bank has in place
appropriate methods for prevention of vesting of deferred variable pay or any part thereof, on
account of negative contribution. The Bank also has in place claw back arrangements in relation
to amounts already paid in the eventuality of a negative contribution.
0ERFORMANCE
LINKED 0LANS 0,0S S
PLPs are formulated for sales personnel who are given sales targets but have limited impact on risk
since credit decisions are exercised independent of the sales function. All PLP payouts are based on
a balanced scorecard framework and are subject to achievement of individual targets enumerated in
the respective scorecards of the employees. A portion of the PLP payouts is deferred till the end of the
year to provide for any unforeseen performance risks.
2EVIEWWOF 2EMUNERATIONA0OLICYYOF THE "ANKHDURING THE PASTDYEAR
The Compensation Policy of the Bank was reviewed by the NRC during the year and there were no
material changes.
Guaranteed Bonus
Guaranteed Bonuses may not be consistent with sound risk management or pay for performance principles
of the Bank and therefore do not form an integral part of the general compensation practice.
For critical hiring for some select strategic roles, the Bank may consider granting of a sign-on bonus as a
prudent way to avoid loading the entire cost of attraction into the fixed component of the compensation
which could have a long term cost implication for the Bank. For such hiring, the sign-on bonus is generally
decided by taking into account appropriate risk factors and market conditions.
For hiring at levels of Whole Time Directors / Managing Director a sign-on bonus, if any, is limited to the first
year only and is in the form of Employee Stock Options.
Employee Stock Option Plan (‘ESOP’s)
The Bank considers ESOPs as a vehicle to create a balance between short term rewards and long term
sustainable value creation. ESOPs play a key role in the attraction and retention of key talent. The Bank
grants equity share options to its Whole Time Directors and other employees above a certain grade. All
plans for grant of options are framed in accordance with the SEBI guidelines, 1999 as amended from time
to time and are approved by the shareholders of the Bank. These plans provide for the grant of options post
approval by the NRC.
The grant of options is reviewed and approved by the NRC. The NRC grants options after considering parameters
such as the incumbent’s grade and performance rating, and such other appropriate relevant factors as may be
deemed appropriate by the NRC. Equity share options granted to the Whole Time Directors are subject to the
approval of the NRC, the Board and the RBI. With effect from April 1, 2017, the Bank has

HDFC Bank Limited Annual Report 2016-17 122


Schedules to the Financial Statements
For the year ended March 31, 2017
amended its policy for grant of ESOPs. Under this policy, ESOPs granted to eligible employees vest over
three tranches spread over a period of 39 months vis-à-vis 36 months for the earlier grants. The first
tranche will vest after fifteen months from the date of grant vis-à-vis twelve months for earlier grants.
Vesting for all ESOPs granted subsequent to April 1, 2017 shall be based on the assessment of
performance of the employee at the time of vesting.
Severance Pay
The Bank does not grant severance pay other than accrued benefits (such as gratuity, pension) except in
cases where it is mandated by any statute.
Hedging
The Bank does not provide any facility or fund or permit its Whole Time Directors and employees to insure
or hedge their compensation structure to offset the risk alignment effects embedded in their compensation
arrangement.
Statutory Bonus
Some section of employees are also paid statutory bonus as per the Payment of Bonus Act (1965) as
amended from time to time.
Remuneration Processes
Fitment at the time of Hire
Pay scales of the Bank are set basis the job size, experience, location and the academic and professional
credentials of the incumbent.
The compensation of new hires is in line with the existing pay ranges and consistent with the compensation
levels of the existing employees of the Bank at similar profiles. The pay ranges are subject to change basis
market trends and the Bank’s talent management priorities. While the Bank believes in the internal equity and
parity as a key determinant of pay it does acknowledge the external competitive pressures of the talent market.
Accordingly, there could be certain key profiles with critical competencies which may be hired at a premium and
treated as an exception to the overall pay philosophy. Any deviation from the defined pay ranges is treated as a
hiring exception requiring approval with appropriate justification.
)NCREMENTE ᄂ M0AYY2EVISION
It is the endeavor of the Bank to ensure external competitiveness as well as internal equity without diluting the overall
focus on optimising cost. In order to enhance our external competitiveness the Bank participates in an annual salary
survey of the banking sector to understand key market trends as well as get insights on relative market pay position
compared to peers. The Bank endeavors to ensure that most employees progress to the median of the market in terms
of fixed pay over time. This coupled with key internal data indicators like performance score, job family, experience, job
grade and salary budget form the basis of decision making on revisions in fixed pay.
Increments in fixed pay for majority of the employee population are generally undertaken effective April 1 every
year. However promotions, confirmations and change in job dimensions could also lead to a change in the fixed
pay during other times of the year.
The Bank also makes salary corrections and adjustments during the year for those employees whose
compensation is found to be below the market pay and who have a good performance track record. However
such pay revisions are done on an exception basis.
Risk, Control and Compliance Staff
The Bank has separated the Risk, Control and Compliance functions from the Business functions in order to
create a strong culture of checks and balances thereby ensuring good asset quality and to eliminate any possible
conflict of interest between revenue generation and risk management and control. Accordingly, the overall
variable pay as well as the annual salary increment of the employees in the Risk, Control and Compliance
functions is based on their performance, functional objectives and goals. The Bank ensures that the mix of fixed
to variable compensation for these functions is weighted in favour of fixed compensation.

HDFC Bank Limited Annual Report 2016-17 123


Schedules to the Financial Statements
For the year ended March 31, 2017
Description of the ways in which current and future risks are taken into account in the remuneration processes. It
should include the nature and type of the key measures used to take account of these risks
The Bank takes into account various types of risks in its remuneration processes. The Bank follows a comprehensive
framework that includes within its ambit the key dimensions of remuneration such as fixed pay, variable pay and long
term incentives (i.e. Employee Stock Options).
Fixed pay: The Bank conducts a comprehensive market benchmarking study to ensure that employees are
competitively positioned in terms of fixed pay. The Bank follows a robust salary review process wherein revisions in
fixed compensation are based on performance. The Bank also makes salary adjustments taking into consideration pay
positioning of employees vis-à-vis market reference points. Through this approach the Bank endeavors to ensure that
the talent risk due to attrition is mitigated as much as possible. Fixed Pay could be revised downwards as well in the
event of certain proven cases of misconduct by an employee.
Variable pay: The Bank has distinct types of variable pay plans as given below:
Quarterly / monthly performance-linked pay (PLP) plans:
All quarterly / monthly PLP plans are based on the principle of balanced scorecard framework that includes within
its ambit both quantitative and qualitative factors including key strategic objectives that ensure future competitive
advantage for the Bank. PLP plans, by design, have deterrents that play a role of moderating payouts based on
the non-fulfillment of established quantitative / qualitative risk factors. Deterrents also include risks arising out of
non-compliance, mis-sell etc. Further, a portion of all payouts under the PLP plans is deferred till the end of the
year to provide for any unforeseen performance risks.
Annual bonus plan:
The Bank takes into consideration the fact that a portion of the Bank’s profits are directly attributable to various
types of risks the Bank is exposed to such as credit risk, market risk, operational risk and other quantifiable risks.
The framework developed by the Bank in order to arrive at the quantum of bonus pool is based on the performance of
the Bank and profitability. The annual bonus is distributed based on business unit and individual performance. The
business unit performance is based on factors such as growth in revenue, growth in profit, cost to income ratio and
achievement vis-à-vis plans and key objectives. Bonus pay out for an individual employee in a particular grade is linked
to the performance rating of the employee and subject to meeting the Bank’s standards of ethical conduct.
The Bank has devised appropriate malus and claw back clauses as a risk mitigant for any negative contributions
of the Bank and / or relevant line of business in any year for Whole Time Directors. Under the malus clause the
incumbent foregoes the vesting of the deferred variable pay in full or in part. Under the claw back clause the
incumbent is obligated to return all the tranches of payout received of bonus amounts pertaining to the reference
performance year. The deferred bonus is paid out post review and approval by the NRC.
The bonus for Whole Time Directors is capped at 70% of the fixed pay in a year. The variable pay for Whole Time
Directors is approved by the NRC as well as the Board of Directors of the Bank and is subject to the approval of
the RBI. The variable pay component is paid out subject to the following conditions:
Where the variable pay constitutes 50% or more of the fixed pay, a portion of the same would be deferred as per
the schedule mentioned in the table below:
0ORTION OFN6ARIABLE 0AY Timelines
60% Payable effective April 1 of the financial year immediately following the performance year.
13.33% Payable effective April 1 of the second financial year following the reference performance
year.
13.33% Payable effective April 1 of the third financial year following the reference performance year.
13.33% Payable effective April 1 of the fourth financial year following the reference performance
year.
Long term incentives (employee stock options):
The Bank also grants employee stock options to employees in certain job bands. The grant is based on
performance rating of the individual.

HDFC Bank Limited Annual Report 2016-17 124


Schedules to the Financial Statements
For the year ended March 31, 2017
Description of the ways in which the Bank seeks to link performance during a performance measurement period
with levels of remuneration
The Bank has a very comprehensive multi-dimensional performance measurement metrics that takes into
consideration multiple factors that include qualitative as well as quantitative factors. The following are the key
performance measurement metrics for the Bank. These also form part of the key metrics for the measurement of the
performance of Whole Time Directors and impact the final remuneration:
Business Growth - This includes growth in advances and deposits;
Profitability - This includes growth in profit after tax;
Asset Quality - Gross NPA, Net NPA and % of Restructured assets to net advances;
Financial Soundness - Capital Adequacy Ratio Position and Tier I capital;
Shareholder value creation - Return on equity; and
Financial Inclusion - Growth in number of households covered, growth in the value of loans disbursed under this
category and achievement against priority sector lending targets.
Most of the above parameters are evaluated in two steps:
Achievement against the plans of the Bank; and
Achievement against the performance of peers.
Apart from the factors related to business growth there is also a key qualitative factor such as regulatory compliance.
Compliance is the key qualitative factor that acts as the moderator in the entire organisation evaluation process. A low
score on compliance can significantly moderate the other performance measures and depending on severity may even
nullify their impact.
While the above parameters form the core evaluation parameters for the Bank each of the business units are
measured on the following from a remuneration standpoint:
Increase in plan over the previous year;
Actual growth in revenue over previous year;
Growth in net revenue (%);
Achievement of net revenue against plan (%);
Actual profit before tax;
Growth in profit before tax compared to the previous year;
Current cost to income; and
Improvement in cost to income over the previous year.
Apart from the above the business units are also measured against certain key business objectives that are qualitative
in nature.
The process by which levels of remuneration in the Bank are aligned to the performance of the Bank, business unit and
individual employees is articulated below.
Fixed Pay
At the conclusion of every financial year the Bank reviews the fixed pay portion of the compensation structure basis
merit-based increments and market corrections. These are based on a combination of performance rating, job band
and the functional category of the individual employee. For a given job band, the merit increment is directly related to
the performance rating. The Bank strives to ensure that most employees progress to the median of the market in terms
of fixed pay over time. All other things remaining equal, the correction percentage is directly related to the performance
rating of the individual.

HDFC Bank Limited Annual Report 2016-17 125


Schedules to the Financial Statements
For the year ended March 31, 2017
Variable Pay
Basis the performance of the business unit, individual performance and role, the Bank has formulated the following
variable pay plans:
ss !NNUALA"ONUS 0LAN
The Bank’s annual bonus is computed as a percentage of the gross salary for every job band. The bonus multiple is based on
performance of the business unit (based on the parameters above), performance rating, job band and the functional category
of the individual employee. The business performance level determines the multiplier for the bonus. All other things remaining
equal, for a given job band, the bonus is directly related to the performance rating. The proportion of variable pay to fixed pay
increases with job band. Employees on the annual bonus plan are not part of the PLPs.
0ERFORMANCE
LINKED 0LANS 0,0S
The Bank has formulated PLPs for its sales personnel who are given sales targets basis a balanced scorecard methodology.
All PLP payouts are subject to the achievement of individual targets enumerated in the respective scorecards of the
employees and moderated by qualitative parameters. A portion of the PLP payouts is deferred till the end of the year to
provide for any unforeseen performance risks. All PLP plans are based on balanced scorecard framework.
%
$ESCRIPTIONIOF THEHWAYS IN WHICHHTHEH"ANK SEEKSETO ADJUST REMUNERATIONATO TAKE
ACCOUNTOOF THEHLONGER TERM performance
A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the Bank’s policy
and criteria for adjusting deferred remuneration before vesting and after vesting
Whole Time Directors
The bonus for Whole Time Directors does not exceed 70% of the fixed pay in a year, thereby ensuring that there is a balance
between the fixed and variable pay. The variable pay for Whole Time Directors is approved by the NRC as well as the Board
and is subject to the approval of the RBI. The variable pay component is paid out subject to the following conditions:
7HEREETHEHVARIABLE PAYYCONSTITUTESI ᄃ OR MORE OF THEHlXED PAY
AN APPROPRIATE PORTION THEREOFRIS DEFERREDRANDN vests as per the schedule mentioned in the table
below:
0ORTION OFN6ARIABLE 0AY Timelines
60% Payable effective April 1 of the financial year immediately following the performance year.
13.33% Payable effective April 1 of the second financial year following the reference performance
year.
13.33% Payable effective April 1 of the third financial year following the reference performance year.
13.33% Payable effective April 1 of the fourth financial year following the reference performance
year.
4HEH"ANK HASADEVISEDSAPPROPRIATE MALUSLANDNCLAWWBACKKCLAUSESUAS AARISKSMITIGANT FOR
ANYYNEGATIVEECONTRIBUTIONS OF the Bank and / or relevant line of business in any year.
9 Malus clause
Under the malus clause the incumbent foregoes the vesting of the deferred variable pay in full or in part. In
the event there is a deterioration in specific performance criteria (such as criteria relating to profit or asset
quality) that are laid down by the NRC, then the NRC would review the deterioration in the performance
taking into consideration the macroeconomic environment as well as internal performance indicators and
accordingly decide whether any part of the deferred tranche pertaining to that financial year merits a
withdrawal. The deferred bonus is paid out post review and approval by the NRC.
Claw back clause
Under the claw back clause the incumbent is obligated to return all the tranches of payout received of
bonus amounts pertaining to the relevant performance year. In the event there is any act attributable to the
concerned Whole Time Director / Managing Director resulting in an incident of willful and deliberate
misinterpretation / misreporting of financial performance (inflating the financials) of the Bank, for a financial
year, which comes to light in the subsequent three years, the incumbent is obligated to return all the
tranches of bonus payout received pertaining to the relevant performance year.
The specific criteria on the applicability of malus and claw back arrangements are reviewed by the NRC annually.

HDFC Bank Limited Annual Report 2016-17 126


Schedules to the Financial Statements
For the year ended March 31, 2017
Employees other than Whole Time Directors
The Bank has formulated the following variable pay plans:
!NNUALABONUS PLANP
The quantum of variable payout is a function of the performance of the Bank, performance of the individual
employee, job band of the employee and the functional category. Basis these key determinants and due
adjustment for risk alignment, a payout matrix for variable pay is developed. Market trends for specific
businesses / functions along with inputs from compensation surveys may also be used in finalising the payout.
Bonus pools are designed to meet specific business needs therefore resulting in differentiation in both the quantum and
the method of payout across functions. Typically higher levels of responsibility receive a higher proportion of variable
pay vis-à-vis fixed pay. The Bank ensures that the time horizon for risk is assessed and the deferment period, if any, for
bonus is set accordingly. Employees on the annual bonus plan are not part of the PLPs.
The following is taken into account while administering the annual bonus:
9 In the event the proportion of variable pay to fixed pay is substantially high (typically variable pay exceeding
50% of fixed pay), the Bank may devise an appropriate deferment schedule after taking into consideration
the nature of risk, time horizon of risk, and the materiality of risk.
9 In cases of deferment of variable pay the Bank makes an assessment prior to the due date for payment of
the deferred portion for any negative contribution. The criteria for negative contribution are decided basis
pre-defined financial benchmarks. The Bank has in place appropriate methods for prevention of vesting of
deferred variable pay or any part thereof, on account of negative contribution. The Bank also has in place
claw back arrangements in relation to amounts already paid in the eventuality of a negative contribution.
0ERFORMANCE
LINKED 0LANS 0,0S
PLPs are formulated for sales personnel who are given sales targets but have limited impact on risk since credit
decisions are exercised independent of the sales function. All PLP payouts are subject to the achievement of
individual targets enumerated in the respective scorecards of the employees. A portion of the PLP payouts is
deferred till the end of the year to provide for any unforeseen performance risks.
Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank
utilises and the rationale for using these different forms
The Bank recognises the importance of variable pay in reinforcing a pay for performance culture. Variable pay
stimulates employees to stretch their abilities to exceed expectations.
!NNUALABONUS PLAN
These are paid to reward performance for a given financial year. This covers all employees and excludes
employees receiving PLP payouts. This is based on performance of the business unit, performance rating, job
band and functional category of the individual. For higher job bands the proportion of variable pay to total
compensation tends to be higher.
0ERFORMANCE
LINKED 0LANS 0,0S
These are paid to frontline sales staff for the achievement of specific sales targets but have limited impact on risk
as credit decisions are exercised independent of the sales function. Further, it has been the endeavor of the Bank
to ensure that the objectives set are based on the principles of a balanced scorecard that takes into account
quantitative and qualitative measures rather than just the achievement of financial numbers. Further all PLPs
have inherent risk adjustment mechanisms manifested in the form of deterrents. All PLP payouts are subject to
the achievement of parameters, both qualitative and quantitative enumerated in the respective scorecards of the
employees. A portion of the PLP payouts is deferred till the end of the year to provide for any unforeseen
performance risks.
%MPLOYEE STOCKKOPTION PLAN
This is to reward for contribution of employees in creating a long term, sustainable earnings and enhancing
shareholder value. Only employees in a certain job band and with a specific performance rating are eligible for
stock options. Performance is the key criteria for granting stock options.

HDFC Bank Limited Annual Report 2016-17 127


Schedules to the Financial Statements
For the year ended March 31, 2017
1UANTITATIVE DISCLOSURES
The quantitative disclosures cover the Bank’s Whole Time Directors and Key Risk Takers. Key Risk Takers are individuals
who can materially set, commit or control significant amounts of the Bank’s resources, and / or exert significant influence
over its risk profile. The Bank’s Key Risk Takers include Whole Time Directors, Group Heads, Business Heads directly
reporting to the Managing Director and select roles in the Bank’s Treasury and Investment Banking functions.
Sr. No. 3UBJECT March 31, 2017 March 31, 2016
(a) Number of meetings held by the Number of meetings: 10 Number of meetings: 9
NRC during the financial year and Remuneration paid: ` 0.20 crore Remuneration paid: ` 0.17 crore
remuneration paid to its members
(b) (i) Number of employees having 33 employees 30 employees
received a variable remuneration
award during the financial year
(b) (ii) Number and total amount of None None
sign-on awards made during the
financial year
(b) (iii) Number and total amount of None None
guaranteed bonuses awarded
during the financial year
(b) (iv) Details of severance pay, in None None
addition to accrued benefits, if any
(c) (i) Total amount of outstanding Total amount of outstanding deferred Total amount of outstanding deferred
deferred remuneration, split into remuneration (cash bonus) was ` 4.62 remuneration (cash bonus) was ` 3.13
cash, shares and share-linked crore. crore.
instruments and other forms
(c) (ii) Total amount of deferred ` 1.45 crore ` 1.20 crore
remuneration paid out in the
financial year
(d) Breakdown of amount of ` 54.75 crore (Fixed*) ` 46.04 crore (Fixed*)
remuneration awards for the ` 12.90 crore (variable pay pertaining ` 9.75 crore (variable pay pertaining to
financial year to show fixed to financial year ended March 31, financial year ended March 31, 2015,
and variable, deferred and non- 2016, in relation to employees where in relation to employees where there
deferred there was no deferment of pay). was no deferment of pay).
` 7.34 crore (variable pay pertaining to ` 6.32 crore (variable pay pertaining to
financial year ended March 31, 2016, financial year ended March 31, 2015,
in relation to employees where there in relation to employees where there
was a deferment of pay), of which was a deferment of pay), of which
` 4.41 crore was non-deferred variable ` 3.79 crore was non-deferred variable
pay and ` 2.93 crore was deferred pay and ` 2.53 crore was deferred
variable pay. variable pay.
Number of stock options granted Number of stock options granted
during the financial year: Nil during the financial year: 40,86,600
(e) (i) Total amount of outstanding Total amount of outstanding deferred Total amount of outstanding deferred
deferred remuneration and remuneration (cash bonus) was ` 4.62 remuneration (cash bonus) was ` 3.13
retained remuneration exposed crore. crore.
to ex-post explicit and / or implicit
adjustments
(e) (ii) Total amount of reductions during Nil Nil
the financial year due to ex-post
explicit adjustments
(e) (iii) Total amount of reductions during Nil Nil
the financial year due to ex-post
implicit adjustments
* Excludes gratuity benefits, since the same is computed at Bank level.

HDFC Bank Limited Annual Report 2016-17 128


Schedules to the Financial Statements
For the year ended March 31, 2017
Segment reporting

Business segments

Business segments have been identified and reported taking into account, the target customer profile, the nature of products
and services, the differing risks and returns, the organisation structure, the internal business reporting system and the
guidelines prescribed by RBI. The Bank operates in the following segments:
Treasury

The treasury segment primarily consists of net interest earnings from the Bank’s investment portfolio, money market
borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and
derivative contracts.
Retail banking

The retail banking segment serves retail customers through a branch network and other delivery channels. This
segment raises deposits from customers and provides loans and other services to customers with the help of specialist
product groups. Exposures are classified under retail banking taking into account the status of the borrower (orientation
criterion), the nature of product, granularity of the exposure and the quantum thereof.

Revenues of the retail banking segment are derived from interest earned on retail loans, interest earned from other
segments for surplus funds placed with those segments, subvention received from dealers and manufacturers, fees
from services rendered, foreign exchange earnings on retail products etc. Expenses of this segment primarily comprise
interest expense on deposits, commission paid to retail assets sales agents, infrastructure and premises expenses for
operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated
expenses of specialist product groups, processing units and support groups.
Wholesale banking

The wholesale banking segment provides loans, non-fund facilities and transaction services to large corporates,
emerging corporates, public sector units, government bodies, financial institutions and medium scale enterprises.
Revenues of the wholesale banking segment consist of interest earned on loans made to customers, interest / fees
earned on the cash float arising from transaction services, earnings from trade services and other non-fund facilities
and also earnings from foreign exchange and derivative transactions on behalf of customers. The principal expenses of
the segment consist of interest expense on funds borrowed from external sources and other internal segments,
premises expenses, personnel costs, other direct overheads and allocated expenses of delivery channels, specialist
product groups, processing units and support groups.
Other banking business

This segment includes income from para banking activities such as credit cards, debit cards, third party product
distribution, primary dealership business and the associated costs.
Unallocated

All items which are reckoned at an enterprise level are classified under this segment. This includes capital and
reserves, debt classified as Tier I or Tier II capital and other unallocable assets and liabilities such as deferred tax,
prepaid expenses, etc.
Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments.
Segment result includes revenue less interest expense less operating expense and provisions, if any, for that segment.
Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides
funding to another segment, based on yields benchmarked to an internally approved yield curve or at a certain agreed
transfer price rate. Transaction charges are levied by the retail banking segment to the wholesale banking segment for
the use by its customers of the retail banking segment’s branch network or other delivery channels. Such transaction
costs are determined on a cost plus basis. Segment capital employed represents the net assets in that segment.

HDFC Bank Limited Annual Report 2016-17 129


Schedules to the Financial Statements
For the year ended March 31, 2017
Geographic segments
The geographic segments of the Bank are categorised as domestic operations and foreign operations. Domestic operations
comprise branches in India and foreign operations comprise branches outside India.
Segment reporting for the year ended March 31, 2017 is given below:
"USINESS SEGMENTS ` crore)

Sr. Particulars Treasury Retail Wholesale Other Total


No. banking banking banking
operations
1 Segment revenue 21,581.79 66,147.50 31,332.24 9,046.69 128,108.22
2 Unallocated revenue -

3 Less: Inter-segment revenue 46,505.77

4 Income from operations (1) + (2) - (3) 81,602.45

5 Segment results 1,308.38 8,432.16 10,473.77 3,365.33 23,579.64

6 Unallocated expenses 1,440.55

7 Income tax expense (including deferred tax) 7,589.43

8 Net profit (5) - (6) - (7) 14,549.66

9 Segment assets 264,536.14 295,828.92 270,969.09 27,205.88 858,540.03

10 Unallocated assets 5,300.18

11 Total assets (9) + (10) 863,840.21

12 Segment liabilities 73,857.49 525,792.90 156,129.90 3,142.74 758,923.03

13 Unallocated liabilities 15,454.80

14 Total liabilities (12) + (13) 774,377.83

15 Capital employed (9) - (12) 190,678.65 (229,963.98) 114,839.19 24,063.14 99,617.00

(Segment assets - Segment liabilities)


16 Unallocated (10) - (13) (10,154.62)

17 Total (15) + (16) 89,462.38

18 Capital expenditure 32.85 846.56 150.30 97.69 1,127.40

19 Depreciation 10.15 659.66 90.78 72.53 833.12

'EOGRAPHIC SEGMENTS ` crore)

Particulars Domestic International


Revenue 80,578.80 1,023.65
Assets 839,928.73 23,911.48

Capital expenditure 1,125.94 1.46

HDFC Bank Limited Annual Report 2016-17 130


Schedules to the Financial Statements
For the year ended March 31, 2017
Segment reporting for the year ended March 31, 2016 is given below:

"USINESS SEGMENTS ` crore)

Sr. Particulars Treasury Retail Wholesale Other Total


No. banking banking banking
operations
1 Segment revenue 18,264.88 59,252.34 27,162.39 7,554.42 112,234.03
2 Unallocated revenue -

3 Less: Inter-segment revenue 41,260.86

4 Income from operations (1) + (2) - (3) 70,973.17

5 Segment results 1,489.21 7,855.03 7,887.20 2,832.27 20,063.71

6 Unallocated expenses 1,425.77

7 Income tax expense (including deferred tax) 6,341.71

8 Net profit (5) - (6) - (7) 12,296.23

9 Segment assets 235,331.98 252,690.65 226,242.65 21,633.06 735,898.34

10 Unallocated assets 4,897.74

11 Total assets (9) + (10) 740,796.08

12 Segment liabilities 77,340.38 448,313.40 120,425.52 2,476.31 648,555.61

13 Unallocated liabilities 19,562.70

14 Total liabilities (12) + (13) 668,118.31

15 Capital employed (9) - (12) 157,991.60 (195,622.75) 105,817.13 19,156.75 87,342.73

(Segment assets - Segment liabilities)


16 Unallocated (10) - (13) (14,664.96)

17 Total (15) + (16) 72,677.77

18 Capital expenditure 5.09 729.46 134.59 69.70 938.84

19 Depreciation 6.16 540.47 101.67 57.54 705.84

'EOGRAPHIC SEGMENTS ` crore)

Particulars Domestic International

Revenue 69,816.77 1,156.40


Assets 704,839.20 35,956.88

Capital expenditure 937.95 0.89

HDFC Bank Limited Annual Report 2016-17 131


Schedules to the Financial Statements
For the year ended March 31, 2017
27 Liquidity coverage ratio
Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2017 is given below: (` crore)

1UARTEREENDED 1UARTEREENDED 1UARTEREENDED 1UARTEREENDED


March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016
Particulars Total Total Total Total Total Total Total Total
unweighted weighted unweighted weighted unweighted weighted unweighted weighted
value value value value value value value value
(average)* (average)* (average)* (average)* (average)* (average)* (average)* (average)*
(IGH 1UALITY ,IQUIDI!SSETS
1 Total High Quality 137,711.74 149,957.35 128,702.05 109,539.23
Liquid Assets
(HQLA)
Cash Outflows
2 Retail deposits and 417,330.77 38,198.75 415,071.84 37,863.08 373,552.53 34,159.65 359,804.34 32,862.93
deposits from small
business customers,
of which:
(i) Stable deposits 70,686.63 3,534.33 72,882.13 3,644.11 63,912.08 3,195.60 62,350.08 3,117.50
(ii) Less stable deposits 346,644.14 34,664.42 342,189.71 34,218.97 309,640.45 30,964.05 297,454.26 29,745.43
3 Unsecured 184,624.84 91,871.70 184,555.12 93,303.55 173,841.76 87,591.52 157,036.26 80,630.67
wholesale funding,
of which:
(i) Operational deposits 27,567.30 6,814.73 26,530.40 6,556.63 24,314.59 6,008.20 21,290.21 5,262.08
(all counterparties)
(ii) Non-operational 147,686.64 75,686.06 148,806.54 77,528.74 142,196.70 74,252.85 130,159.94 69,782.48
deposits (all
counterparties)
(iii) Unsecured debt 9,370.90 9,370.91 9,218.18 9,218.18 7,330.47 7,330.47 5,586.11 5,586.11
4 Secured wholesale 161.11 - 2,150.00 -
funding
5 Additional 85,739.97 54,644.47 94,703.09 61,891.19 90,930.14 57,181.27 93,163.68 57,797.70
requirements, of
which:
(i) Outflows related to 44,943.06 44,943.06 51,903.36 51,903.36 47,316.91 47,316.91 46,907.18 46,907.18
derivative exposures
and other collateral
requirement
(ii) Outflows related to - - - - - - - -
loss of funding on
debt products
(iii) Credit and liquidity 40,796.91 9,701.41 42,799.73 9,987.83 43,613.23 9,864.36 46,256.50 10,890.52
facilities
6 Other contractual 24,420.02 24,420.02 20,914.62 20,914.62 17,944.34 17,944.34 15,940.48 15,940.48
funding obligation
7 Other contingent 52,591.16 2,596.66 50,409.16 1,512.27 49,183.26 1,475.50 47,915.37 1,437.46
funding obligations
8 Total Cash 211,892.71 215,484.71 200,502.28 188,669.24
Outflows

HDFC Bank Limited Annual Report 2016-17 132


Schedules to the Financial Statements
For the year ended March 31, 2017
Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2017 is given below : (contd.) (` crore)

1UARTEREENDED 1UARTEREENDED 1UARTEREENDED 1UARTEREENDED


March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016
Particulars Total Total Total Total Total Total Total Total
unweighted weighted unweighted weighted unweighted weighted unweighted weighted
value value value value value value value value
(average)* (average)* (average)* (average)* (average)* (average)* (average)* (average)*
Cash Inflows

9 Secured lending - - 1,333.33 - 5,033.33 - 1,355.17 3.28


(e.g. reverse repo)
10 Inflows from 39,276.52 21,397.60 36,889.88 19,466.20 35,305.32 18,815.99 33,897.47 18,070.68
fully performing
exposures
11 Other cash inflows 58,695.96 53,161.71 65,066.62 59,505.52 66,471.65 61,083.74 62,858.78 57,290.61
12 Total Cash Inflows 97,972.48 74,559.31 103,289.83 78,971.72 106,810.30 79,899.73 98,111.42 75,364.57
Total Total Total Total
Adjusted Adjusted Adjusted Adjusted
Value Value Value Value
13 4/4!, (1,! 137,711.74 149,957.35 128,702.05 109,539.23
14 Total Net Cash 137,334.40 136,512.99 120,602.55 113,304.67
Outflows
15 Liquidity Coverage 100.28% 109.85% 106.72% 96.68%
Ratio (%)

In accordance with RBI guidelines, average weighted and unweighted amounts are calculated taking simple daily average for the quarter ended
March 31, 2017 and simple average for the months in respective previous quarters in the financial year ended March 31, 2017.
1UALITATIVETDISCLOSURE ONR,#2
The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has an adequate
stock of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its
liquidity needs for a 30 calendar day liquidity stress scenario.
The LCR is calculated by dividing the amount of High Quality Liquid unencumbered Assets (HQLA) by the estimated net outflows over a
stressed 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories
of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related
exposures, partially offset by inflows from assets maturing within 30 days. The average LCR for the quarter ended March 31, 2017 was at
100.28%, above the RBI prescribed minimum requirement of 80%. The average HQLA was ` 137,711.74 crore of which government
securities constituted about 75%. The outflows related to derivative exposures (net of cash inflows)
collateral requirements and undrawn commitments constituted about 0.3% and 5% respectively of average cash outflow of `
211,892.70 crore. Average inflows from assets were ` 74,559.31 crore.
Average LCR compared to previous quarter ended December 31, 2016 has remained relatively stable with a slight decrease in the
average HQLA position mainly on account of decrease in unencumbered SLR securities.
Average LCR has been continuously increasing compared to that in the previous year ended March 31, 2016 primarily driven by
increase in the average HQLA position on account of increase in liquid investments as well as additional FALLCR (1% of NDTL)
permitted by RBI to be considered as HQLA from July 2016.
A strong and diversified liabilities profile has been at the helm on Bank’s growth strategy. The Bank has consistently maintained a
robust funding profile with a significant portion of funding through deposits. As at March 31, 2017 the top 20 depositors comprised
around 5% of total deposits.

HDFC Bank Limited Annual Report 2016-17 133


Schedules to the Financial Statements
For the year ended March 31, 2017
Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2016 is given below: (` crore)

1UARTEREENDED 1UARTEREENDED 1UARTEREENDED 1UARTEREENDED


March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015
Particulars Total Total Total Total Total Total Total Total
unweighted weighted unweighted weighted unweighted weighted unweighted weighted
value value value value value value value value
(average)* (average)* (average)* (average)* (average)* (average)* (average)* (average)*
(IGH 1UALITY ,IQUIDI!SSETS

1 Total High Quality Liquid 87,390.70 82,923.58 85,380.05 84,103.02


Assets (HQLA)
Cash Outflows

2 Retail deposits and


deposits from small 345,295.41 31,521.71 336,581.15 30,736.15 327,063.80 29,851.26 303,371.26 27,605.03
business customers, of
which:
(i) Stable deposits 60,156.65 3,007.83 58,439.26 2,921.96 57,102.27 2,855.11 54,641.85 2,732.09

(ii) Less stable deposits 285,138.76 28,513.88 278,141.89 27,814.19 269,961.53 26,996.15 248,729.41 24,872.94

3 Unsecured wholesale 152,346.46 77,310.79 150,761.23 78,144.79 143,971.45 76,153.26 132,334.88 67,639.08
funding, of which:
(i) Operational deposits (all 25,513.50 6,310.16 21,315.02 5,260.88 20,460.39 5,067.45 21,646.72 5,345.21
counterparties)
(ii) Non-operational deposits 120,422.61 64,590.28 120,973.12 64,410.82 117,518.89 65,093.64 105,628.67 57,234.38
(all counterparties)
(iii) Unsecured debt 6,410.35 6,410.35 8,473.09 8,473.09 5,992.17 5,992.17 5,059.49 5,059.49

4 Secured wholesale funding - - - -

5 Additional requirements, 97,373.97 61,003.46 104,680.45 57,231.91 167,835.96 111,671.11 185,435.72 129,455.26
of which:
(i) Outflows related to
derivative exposures 49,752.81 49,752.81 46,028.74 46,028.74 101,182.99 101,182.99 118,889.35 118,889.35
and other collateral
requirement
(ii) Outflows related to loss of - - - - - - - -
funding on debt products
(iii) Credit and liquidity 47,621.16 11,250.65 58,651.71 11,203.17 66,652.97 10,488.12 66,546.37 10,565.91
facilities
6 Other contractual funding 14,349.84 14,349.84 12,831.35 12,831.35 13,763.63 13,763.63 14,798.60 14,798.60
obligation
7 Other contingent funding 46,936.27 1,724.24 45,128.25 2,256.41 42,615.71 2,130.79 43,401.88 2,170.09
obligations
8 Total Cash Outflows 185,910.04 181,200.61 233,570.05 241,668.06

HDFC Bank Limited Annual Report 2016-17 134


Schedules to the Financial Statements
For the year ended March 31, 2017
Quantitative information on Liquidity Coverage Ratio (LCR) for year ended March 31, 2016 is given below: (contd.) (` crore)

1UARTEREENDED 1UARTEREENDED 1UARTEREENDED 1UARTEREENDED


March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015
Particulars Total Total Total Total Total Total Total Total
unweighted weighted unweighted weighted unweighted weighted unweighted weighted
value value value value value value value value
(average)* (average)* (average)* (average)* (average)* (average)* (average)* (average)*
Cash Inflows

9 Secured lending (e.g. 166.67 - 39.05 5.86 5,333.33 - 3,212.00 -


reverse repo)
10 Inflows from fully 32,497.40 17,346.90 29,098.80 15,554.48 28,536.42 15,502.29 25,435.62 13,600.86
performing exposures
11 Other cash inflows 65,636.78 60,149.17 58,287.62 52,863.62 116,296.73 110,836.09 134,027.18 129,022.10

12 Total Cash Inflows 98,300.85 77,496.07 87,425.47 68,423.96 150,166.48 126,338.38 162,674.80 142,622.96

Total Adjusted Total Adjusted Total Adjusted Total Adjusted


Value Value Value Value
13 4/4!, (1,! 87,390.70 82,923.58 85,380.05 84,103.02

14 Total Net Cash Outflows 108,413.96 112,776.65 107,231.67 99,045.10

15 Liquidity Coverage Ratio (%) 80.61% 73.53% 79.62% 84.91%

The average weighted and unweighted amounts are calculated taking simple average for the months in the respective quarters

Qualitative disclosure on LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has an adequate
stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its
liquidity needs for a 30 calendar day liquidity stress scenario.

The LCR is calculated by dividing the amount of High Quality Liquid unencumbered Assets (HQLA) by the estimated net outflows over a
stressed 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories
of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related
exposures, partially offset by inflows from assets maturing within 30 days. The average LCR was at 80.61% for the quarter ended March
31, 2016. The average HQLA was ` 87,390.70 crore of which government securities constituted about 73%. The outflows related to
derivative exposures (net of cash inflows) / collateral requirements and undrawn commitments constituted about 2% and 6% respectively
of average cash outflow of ` 185,910.04 crore. Average inflows from assets were ` 77,496.07 crore.

Average LCR for the quarter ended March 31, 2016 was 80.61%, which was above the RBI prescribed minimum requirement of 70%.

Major reasons for movement in average LCR as compared to the previous quarter ended December 31, 2015 are as follows:

(1,! FOR THEHQUARTEREENDEDD -ARCHR


INCREASEDEAS ADDITIONAL &!,,#2, OF .$4, 4WAS PERMITTED BY 2")"TO BE considered as HQLA from February 2016.

7ITHIN THE UNSECURED WHOLESALE FUNDING


DTHEWPROPORTION OFNUNSECURED DEBTDWHICHEATTRACTS HIGHERHOUTmOWWFACTORS DECREASED
ss 7ITHIN THE RETAILHDEPOSITS
THETPROPORTION OFNLESS STABLE FUNDING WHICH ATTRACTCHIGHER OUTmOWWFACTORS OINCREASED
ss )NmOWS FROMFPERFORMING ADVANCESCINCREASED
ss /THERHCASH INmOWS INCREASED MAINLYSON ACCOUNT OFNINCREASE IN INmOWS FROMFSHORTTTERMMLENDING
HDFC Bank Limited Annual Report 2016-17 135
Schedules to the Financial Statements
For the year ended March 31, 2017
A strong and diversified liabilities profile has been at the helm on Bank’s growth strategy. The Bank has consistently maintained a
robust funding profile with a significant portion of funding through deposits. As at March 31, 2016 the top 20 depositors comprised
around 5% of total deposits.

Note: CCIL guaranteed deals were netted for computing foreign exchange & derivative values with effect from quarter ended December
31, 2015. Hence, the numbers for serial number 5(i) and 11 are not strictly comparable with those of the previous quarters.

Related party disclosures

As per AS-18, Related Party Disclosure, the Bank’s related parties are disclosed below:

Promoter

Housing Development Finance Corporation Limited

Subsidiaries

HDFC Securities Limited

HDB Financial Services Limited

Associates

International Asset Reconstruction Company Private Limited

Atlas Documentary Facilitators Company Private Limited*

HBL Global Private Limited*

*Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited amalgamated with HDB Financial
Services Limited pursuant to the approval of the Honourable High courts of Gujarat and Bombay with effect from December
1, 2016. The appointed date of the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, transactions
entered into by the Bank with these entities during the financial year ended March 31, 2017 have been disclosed under
transactions with HDB Financial Services Limited.

Welfare trust of the Bank

HDB Employees Welfare Trust

Key management personnel

Aditya Puri, Managing Director

Paresh Sukthankar, Deputy Managing

Director Kaizad Bharucha, Executive Director

Related parties to key management personnel

Salisbury Investments Private Limited, Tanaksh Innovations Private Limited, Akuri by Puri, Anita Puri, Amit Puri, Amrita Puri,
Adishwar Puri, Aarti Sood, Sangeeta Sukthankar, Dattatraya Sukthankar, Shubhada Sukthankar, Akshay Sukthankar, Ankita
Sukthankar, Madhavi Lad, Havovi Bharucha, Huzaan Bharucha, Danesh Bharucha, Daraius Bharucha.

In accordance with paragraph 5 of AS-18, the Bank has not disclosed certain transactions with relatives of key management
personnel as they are in the nature of banker-customer relationship.

The significant transactions between the Bank and related parties for year ended March 31, 2017 are given below. A specific
related party transaction is disclosed as a significant transaction wherever it exceeds 10% of all related party transactions in
that category:

HDFC Bank Limited Annual Report 2016-17 136


Schedules to the Financial Statements
For the year ended March 31, 2017
Interest paid: HDFC Securities Limited ` 25.03 crore (previous year: ` 18.96 crore); HDB Financial Services Limited
7.17 crore (previous year: ` 4.52 crore); Housing Development Finance Corporation Limited ` 5.57 crore (previous year:
7.25 crore).
ss )NTEREST RECEIVED ($" &INANCIAL 3ERVICESC,IMITED,` 139.21 crore (previous year: ` 100.06 crore).
2ENDERINGNOF SERVICES (OUSING $EVELOPMENT &INANCE #ORPORATIONN,IMITEDM` 207.45 crore (previous year: ` 178.83 crore).

2ECEIVINGIOF SERVICES ($"$&INANCIALN3ERVICESC,IMITEDI` 1,453.54 crore (previous year 79.87 crore); Housing
Development Finance Corporation Limited ` 343.10 crore (previous year: ` 247.21 crore).
ss $IVIDEND PAID (OUSING $EVELOPMENT &INANCE #ORPORATIONI,IMITEDD` 373.55 crore (previous year: ` 314.57 crore).

$IVIDEND RECEIVED ($"$ &INANCIALN 3ERVICESC ,IMITEDI ` 102.22 crore (previous year: ` 88.40 crore); HDFC Securities
Limited ` 60.64 crore (previous year: ` 60.64 crore).
ss0URCHASE OFAlXED ASSETS ($" &INANCIAL 3ERVICESC,IMITED,` 0.23 crore (previous year: Nil).
The Bank’s related party balances and transactions for the year ended March 31, 2017 are summarised as follows: (` crore)
)TEMSE ᄂ M2ELATED PARTY Promoter Subsidiaries Associates Key management Total
personnel
Deposits taken 2,500.25 597.93 25.05 13.61 3,136.84
(2,500.25) (816.14) (25.05) (60.14) (3,401.58)
Deposits placed 0.15 10.62 - 2.51 13.28
(0.15) (10.65) - (2.51) (13.31)
Advances given - 1,180.15 0.05 3.44 1,183.64
- (1,588.18) (0.05) (3.44) (1,591.67)
Fixed assets purchased from - 0.23 - - 0.23
Fixed assets sold to - - - - -
Interest paid to 5.57 32.20 0.51 1.02 39.30
Interest received from - 139.21 - 0.03 139.24
Income from services rendered to 207.45 28.37 - - 235.82
Expenses for receiving services from 343.10 1,456.69 - 0.76 1,800.55
Equity investments - 3,812.15 31.17 - 3,843.32
- (3,812.15) (31.17) - (3,843.32)
Other investments - 675.00 - - 675.00
(126.48) (675.00) - - (801.48)
Dividend paid to 373.55 - - 4.49 378.04
Dividend received from - 162.86 - - 162.86
Receivable from 23.16 2.05 - - 25.21
(23.16) (2.38) - - (25.54)
Payable to 33.67 103.25 - - 136.92
(33.67) (137.18) - - (170.85)
Guarantees given 0.12 - - - 0.12
(0.14) (0.05) - - (0.19)
Remuneration paid - - - 20.79 20.79
Loans purchased from 13,845.65 - - - 13,845.65
Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding
balances at each quarter-end.
Remuneration paid excludes value of employee stock options exercised during the year.

HDFC Bank Limited Annual Report 2016-17 137


Schedules to the Financial Statements
For the year ended March 31, 2017
The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with parties which include its
promoter. The foreign exchange and derivative transactions are undertaken in line with the RBI guidelines. The notional
principal amount of foreign exchange and derivative contracts transacted with the promoter that were outstanding as at
March 31, 2017 is ` 665.77 crore (previous year: ` 491.21 crore). The contingent credit exposure pertaining to these
contracts computed in line with the extant RBI guidelines on exposure norms is ` 40.18 crore (previous year: ` 18.90 crore).
During the year ended March 31, 2017, the Bank purchased debt securities from Housing Development Finance Corporation
Limited ` 2,320.00 crore (previous year: ` 1,415.00 crore) and from HDB Financial Services Limited ` 1,427.00 crore
(previous year: ` 322.00 crore) issued by these entities.
During the year ended March 31, 2017, the Bank has made no investment (previous year: ` 1,748.66 crore) in pass through
certificates in respect of assets securitised out by HDB Financial Services Limited.
During the year ended March 31, 2017, the Bank paid rent of ` 0.66 crore (previous year: ` 0.66 crore) to parties related to
the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2017, the security deposit
outstanding was ` 3.50 crore (previous year: ` 3.50 crore).
The deposit outstanding from HDB Employees Welfare Trust as at March 31, 2017 was ` 48.52 crore (previous year:
46.46 crore). The Bank also paid interest on deposit from HDB Employees Welfare Trust aggregating to ` 3.68 crore
(previous year: ` 3.88 crore).
The Bank’s related party balances and transactions for the year ended March 31, 2016 are summarised as follows:
(` crore)

)TEMSE ᄂ M2ELATED PARTY Promoter Subsidiaries Associates Key management Total


personnel
Deposits taken 4,405.56 509.86 100.02 10.12 5,025.56
(4,405.56) (811.10) (100.02) (11.50) (5,328.18)
Deposits placed 0.15 10.51 0.10 2.51 13.27
(0.15) (10.51) (7.10) (2.51) (20.27)
Advances given - 1,590.12 0.22 0.95 1,591.29
- (1,590.12) (36.95) (0.99) (1,628.06)
Fixed assets purchased from - 0.12 - - 0.12
Fixed assets sold to - - - - -
Interest paid to 7.25 23.48 3.89 0.84 35.46
Interest received from - 100.06 2.27 0.02 102.35
Income from services rendered to 178.83 24.12 6.07 - 209.02
Expenses for receiving services from 247.21 81.77 1,173.64 0.76 1,503.38
Equity investments - 2,751.77 31.19 - 2,782.96
- (2,751.77) (31.19) - (2,782.96)
Dividend paid to 314.57 - - 3.37 317.94
Dividend received from - 149.04 0.01 - 149.05
Receivable from 16.30 0.08 - - 16.38
(28.42) (1.81) (0.38) - (30.61)
Payable to 26.93 21.57 39.85 - 88.35
(26.93) (25.65) (102.70) - (155.28)
Guarantees given 0.14 0.05 - - 0.19
(0.14) (0.05) - - (0.19)
Remuneration paid - - - 18.34 18.34
Loans purchased from 12,773.37 - - - 12,773.37
Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding
balances at each quarter-end.
Remuneration paid excludes value of employee stock options exercised during the year.

HDFC Bank Limited Annual Report 2016-17 138


Schedules to the Financial Statements
For the year ended March 31, 2017
29 Intra-Group exposure
Intra-Group exposures in accordance with RBI guidelines are as follows: (` crore)

Particulars March 31, 2017 March 31, 2016


Total amount of intra-group exposures 4,502.47 2,413.58
Total amount of top 20 intra-group exposures 4,502.47 2,413.58
Percentage of intra-group exposures to total exposure of the Bank on borrowers 0.48% 0.33%
/ customers
Details of breach of limits on intra-group exposures and regulatory action Nil Nil
thereon, if any

Leases
Operating leases primarily comprise office premises, staff residences and Automated Teller Machines (‘ATM’s), which are
renewable at the option of the Bank. The details of maturity profile of future operating lease payments are given below:
(` crore)

Particulars March 31, 2017 March 31, 2016


Not later than one year 939.53 887.30
Later than one year and not later than five years 2,980.22 2,805.03

Later than five years 3,043.98 2,481.82

Total 6,963.73 6,174.15

The total of minimum lease payments recognised in the Statement of Profit and 1,094.86 1,005.70

Loss for the year


Total of future minimum sub-lease payments expected to be received under 25.33 37.13

non-cancellable sub-leases
Sub-lease amounts recognised in the Statement of Profit and Loss for the year 11.31 10.67

Contingent (usage based) lease payments recognised in the Statement of 138.79 180.53

Profit and Loss for the year


The Bank has sub-leased certain of its properties taken on lease.

The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue
restrictions or onerous clauses in the agreements.
31 Transfers to Depositor Education and Awareness Fund (DEAF)
The details of amount transferred during the respective year to DEAF are as under: (` crore)

Particulars March 31, 2017 March 31, 2016


Opening balance of amounts transferred to DEAF 136.85 92.14
Add: Amounts transferred to DEAF during the year 95.10 45.89
Less: Amounts reimbursed by DEAF towards claims (1.45) (1.18)
Closing balance of amounts transferred to DEAF 230.50 136.85

HDFC Bank Limited Annual Report 2016-17 139


Schedules to the Financial Statements
For the year ended March 31, 2017
Penalties levied by the RBI

Further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the
Reserve Bank of India (RBI) had conducted a scrutiny of the transactions carried out by the Bank under Section 35(1A) of
the Banking Regulation Act, 1949. The RBI issued a Show Cause Notice to which the Bank had submitted its detailed
response. After considering the Bank’s submission, the RBI imposed a penalty of ` 2.00 crore on the Bank vide its letter
dated July 19, 2016 on account of pendency in receipt of bill of entry relating to advance import remittances made and
lapses in adhering to KYC / AML guidelines in this respect. The penalty has since been paid. The Bank has implemented a
comprehensive corrective action plan, to strengthen its internal control mechanisms so as to ensure that such incidents do
not recur. The above matter does not constitute a material weakness or significant deficiency in the framework of internal
financial controls over financial reporting maintained by the Bank under Section 134(3)(q) of the Companies Act 2013.

During the year ended March 31, 2016, RBI had not imposed any penalties on the Bank.

$ISCLOSURE FOR CUSTOMERSCOMPLAINTS ᄂ UNIMPLEMENTED AWARDS OF


"ANKING /MBUDSMAN ss #USTOMER COMPLAINTS

Customer complaints other than ATM transaction disputes

Particulars March 31, 2017 March 31, 2016

(a) No. of complaints pending at the beginning of the year 651 496
(b) No. of complaints received during the year 96,454 62,224

(c) No. of complaints redressed during the year 94,756 62,069

(d) No. of complaints pending at the end of the year 2,349 651

ATM transaction disputes relating to the Bank’s customers on the Bank’s ATMs

Particulars March 31, 2017 March 31, 2016

(a) No. of complaints pending at the beginning of the year 101 71


(b) No. of complaints received during the year 12,703 13,170

(c) No. of complaints redressed during the year 12,659 13,140

(d) No. of complaints pending at the end of the year 145 101

(e) Complaints per ten thousand transactions 0.62 0.50

(C) ATM transaction disputes relating to the Bank’s customers on other banks’ ATMs

Particulars March 31, 2017 March 31, 2016

(a) No. of complaints pending at the beginning of the year 1,118 1,334
(b) No. of complaints received during the year 95,415 89,975

(c) No. of complaints redressed during the year 95,069 90,191

(d) No. of complaints pending at the end of the year 1,464 1,118

(e) Complaints per ten thousand transactions 3.69 3.86

HDFC Bank Limited Annual Report 2016-17 140


Schedules to the Financial Statements
For the year ended March 31, 2017
Total customer complaints and ATM transaction disputes [total of tables (A), (B) and (C) above]

Particulars March 31, 2017 March 31, 2016

(a) No. of complaints pending at the beginning of the year 1,870 1,901
(b) No. of complaints received during the year 2,04,572 1,65,369

(c) No. of complaints redressed during the year 2,02,484 1,65,400

(d) No. of complaints pending at the end of the year 3,958 1,870

Note: ATM transaction disputes reported in the above tables are in accordance with RBI guidelines on disclosure
of customer complaints.

ss !WARDS PASSEDABYYTHET"ANKING"/MBUDSMAN "/

Particulars March 31, 2017 March 31, 2016


(a) No. of unimplemented awards at the beginning of the year - -
(b) No. of awards passed by the BO during the year - -

(c) No. of awards implemented during the year - -

(d) No. of unimplemented awards at the end of the year - -

4OPPAREASROF CUSTOMERFCOMPLAINTS

The average number of customer complaints per branch, including ATM transaction disputes, was 3.7 per month during
the year ended March 31, 2017 (previous year: 3.3 per month). For the year ended March 31, 2017, retail liability
segment accounted for 74.61% of the total complaints (a reduction from 82.60% for the previous year) followed by
credit cards at 18.15% of the total complaints (an increase from 11.86% for the previous year), retail assets at 6.08% of
the total complaints (an increase from 3.68% for the previous year), while other segments accounted for 1.16% of total
complaints (as against 1.86% in the previous year). The top 10 areas of customer complaints for the year ended March
31, 2017, including ATM transaction disputes, accounted for 1,48,462 complaints and were 72.57% of total complaints
as against 1,23,323 complaints which were 74.57% of the total complaints for the year ended March 31, 2016. The top
5 areas of customer complaints on which the Bank is working towards root cause remediation are - ‘cash not dispensed
or less cash dispensed in the Bank’s ATMs’, phishing / unauthorized usage through debit card online, transaction
dispute related – credit cards, phishing / unauthorized usage through debit card done at other bank’s ATM outlets and
customer disputes relating to EMI / ROI / Tenor / Loan Amount.

Position of BO complaints as per RBI annual report

As per a report published by the RBI for the year ended June 30, 2016, the number of BO complaints per branch for the Bank
was 1.68 (previous year: 1.36). The number of BO complaints other than credit cards per 1,000 accounts was at
0.13 (previous year: 0.10).The number of BO complaints (credit card related) per 1,000 cards was at 0.08 (previous year:
0.06) for the Bank.

Disclosure of Letters of Comfort (LoC) issued by the Bank

The Bank has not issued any Letter of Comfort during the years ended March 31, 2017 and March 31, 2016.

HDFC Bank Limited Annual Report 2016-17 141


Schedules to the Financial Statements
For the year ended March 31, 2017
35 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain
disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of
delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is
based on the information available with the Bank which has been relied upon by the auditors.

36 Overseas assets, NPAs and revenue (` crore)

Particulars March 31, 2017 March 31, 2016

Total Assets 23,911.48 35,956.88


Total NPAs 121.59 124.23

Total Revenue 1,023.65 1,156.39

/FF
"ALANCEA3HEETN306S

There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.

Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2017 (previous year: Nil).

Corporate social responsibility

Operating expenses include ` 305.42 crore (previous year: ` 194.81 crore) for the year ended March 31, 2017 towards
Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013.

The Bank has spent 2.0% (previous year: 1.6%) of its average net profit for the last three financial years as part of its CSR
for the year ended March 31, 2017. As a responsible bank, it has approached the mandatory requirements of CSR spends
positively by laying a foundation on which it would build and scale future projects and partnerships. The Bank continues to
evaluate strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come, the Bank will
further strengthen its processes as per requirement.

The details of amount spent during the respective year towards CSR are as under: (` crore)

March 31, 2017 March 31, 2016


Sr. Particulars Amount Amount Total Amount Amount Total
No. spent UNPAID ᄂ spent UNPAID ᄂ
provision provision
(i) Construction / acquisition of any asset - - - - - -
(ii) On purpose other than (i) above 305.42 - 305.42 186.46 8.35 194.81

Investor education and protection fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund
by the Bank.

HDFC Bank Limited Annual Report 2016-17 142


Schedules to the Financial Statements
For the year ended March 31, 2017
Disclosure on remuneration to Non-Executive Directors

Remuneration by way of sitting fees to the Non-Executive Directors for attending meetings of the Board and its committees
during the year ended March 31, 2017 amounted to ` 1.67 crore (previous year: ` 1.33 crore).

Further, in accordance with RBI guidelines, profit related commission to all Non-Executive Directors other than the
Chairperson for the year ended March 31, 2017 amounted to ` 0.80 crore (previous year: ` 0.60 crore).

Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year’s
presentation.

For and on behalf of the Board


Shyamala Gopinath Aditya Puri Anami Roy

Chairperson Managing Director Bobby Parikh


Keki Mistry
Paresh Sukthankar Kaizad Bharucha Malay Patel
Partho Datta
Deputy Managing Director Executive Director
Renu Karnad
3ANJAYY$ONGRE Sashidhar Jagdishan Srikanth Nadhamuni
Executive Vice President Chief Financial Officer Umesh Sarangi
Mumbai, April 21, 2017 (Legal) & Company Secretary Directors

HDFC Bank Limited Annual Report 2016-17 143


Independent Auditor’s Report
To the Members of HDFC Bank Limited

Report on the Consolidated Financial Statements We conducted our audit in accordance with the
Standards on Auditing specified under Section 143(10)
We have audited the accompanying consolidated financial
of the Act. Those Standards require that we comply with
statements of HDFC BANK LIMITED (hereinafter
ethical requirements and plan and perform the audit to
referred to as “the Holding Company”) and its
subsidiaries (the Holding Company and its subsidiaries obtain reasonable assurance about whether the
together referred to as “the Group”) and its associate, consolidated financial statements are free from material
comprising the Consolidated Balance Sheet as at 31st misstatement.
March, 2017, the Consolidated Statement of Profit and An audit involves performing procedures to obtain audit
Loss, the Consolidated Cash Flow Statement for the evidence about the amounts and disclosures in the
year then ended, and a summary of the significant consolidated financial statements. The procedures
accounting policies and other explanatory information selected depend on the auditor’s judgment, including
(hereinafter referred to as “the consolidated financial the assessment of the risks of material misstatement of
statements”) - [See paragraph 5 below] the consolidated financial statements, whether due to
Management’s Responsibility for the Consolidated fraud or error. In making those risk assessments, the
Financial Statements auditor considers internal financial controls relevant to
the Holding Company’s preparation of the consolidated
The Holding Company’s Board of Directors is responsible
financial statements that give a true and fair view, in
for the preparation of these consolidated financial
statements in terms of the requirements of the Companies order to design audit procedures that are appropriate in
Act, 2013 (hereinafter referred to as “the Act”) that give a the circumstances. An audit also includes evaluating the
true and fair view of the consolidated financial position, appropriateness of the accounting policies used and the
consolidated financial performance and consolidated cash reasonableness of the accounting estimates made by
flows of the Group and its associate in accordance with the Holding Company’s Board of Directors, and
provisions of Section 29 of the Banking Regulation Act, evaluating the overall presentation of the consolidated
1949, the accounting principles generally accepted in India, financial statements.
including the Accounting Standards prescribed under We believe that the audit evidence obtained by us and
Section 133 of the Act, and guidelines issued by the the audit evidence obtained by the other auditors in
Reserve Bank of India as applicable to the respective terms of their report referred to in sub-paragraph (a) of
entities. The respective Board of Directors of the paragraph 5 below, is sufficient and appropriate to
companies included in the Group and the associate are provide a basis for our audit opinion on the consolidated
responsible for maintenance of adequate accounting financial statements.
records in accordance with the provisions of the Act for
safeguarding the assets of the Group and the associate Opinion
and for preventing and detecting frauds and other In our opinion and to the best of our information and
irregularities; the selection and application of appropriate according to the explanations given to us and based on
accounting policies; making judgments and estimates that the matters referred to in paragraph 5 below, the
are reasonable and prudent; and the design, aforesaid consolidated financial statements give the
implementation and maintenance of adequate internal information required by the Act in the manner so
financial controls, that were operating effectively for required and give a true and fair view in conformity with
ensuring the accuracy and completeness of the accounting the accounting principles generally accepted in India, of
records, relevant to the preparation and presentation of the the consolidated state of affairs of the Group and its
financial statements that give a true and fair view and are
associate as at 31st March, 2017, and the consolidated
free from material misstatement, whether due to fraud or
profit and consolidated cash flows for the year ended on
error, which have been used for the purpose of preparation
that date.
of the consolidated financial statements by the Directors of
the Holding Company. Other Matters
We did not audit the financial statements of a subsidiary
Auditor’s Responsibility whose financial statements reflect total assets of `
3,352,692 lacs as at 31st March, 2017, total
Our responsibility is to express an opinion on these
revenues of ` 572,450 lacs and net cash
consolidated financial statements based on our audit. In
(outflows) amounting to ` 2,032 lacs for the year
conducting our audit, we have taken into account the
ended on that date, as considered in the
provisions of the Act, the accounting and auditing
standards and matters which are required to be consolidated financial statements. These financial
included in the audit report under the provisions of the statements have been audited by other auditors
Act and the Rules made thereunder. whose report has been furnished to us by the

HDFC Bank Limited Annual Report 2016-17 144


Management and our opinion on the consolidated In our opinion, the aforesaid consolidated financial
financial statements, in so far as it relates to the statements comply with the Accounting Standards
amounts and disclosures included in respect of prescribed under Section 133 of the Act, as
this subsidiary, and our report in terms of applicable.
subsection (3) of Section 143 of the Act, in so far On the basis of the written representations received from
as it relates to the aforesaid subsidiary is based the directors of the Holding Company as at 31st
solely on the report of the other auditors. March, 2017 taken on record by the Board of
The consolidated financial statements also include the Directors of the Holding Company and the report of
Group’s share of net profit of ` 234 lacs for the the statutory auditors of the subsidiary company not
year ended 31st March, 2017, as considered in audited by us, none of the directors of the Group
the consolidated financial statements, in respect companies is disqualified as at 31st March, 2017
of an associate, whose financial statements have from being appointed as a director in terms of
not been audited by us. These financial Section 164(2) of the Act.
statements are unaudited and have been With respect to the adequacy of the internal financial
furnished to us by the Management and our controls over financial reporting and the operating
opinion on the consolidated financial statements, effectiveness of such controls, refer to our separate
in so far as it relates to the amounts and report in “Annexure A”. Our report expresses an
disclosures included in respect of this associate, unmodified opinion on the adequacy and operating
is based solely on such unaudited financial effectiveness of the Group’s internal financial
statements as certified by the Management of that controls over financial reporting.
associate. In our opinion and according to the
With respect to the other matters to be included in the
information and explanations given to us by the
Auditor’s Report in accordance with Rule 11 of the
Holding Company’s Management, these financial
Companies (Audit and Auditor’s) Rules, 2014, as
statements are not material to the Group.
amended, in our opinion and to the best of our
Our opinion on the consolidated financial information and according to the explanations
statements, and our report on Other Legal and given to us:
Regulatory Requirements below is not modified in
The consolidated financial statements disclose
respect of the above matters with respect to our
the impact of pending litigations on the
reliance on the work done and the reports of the
consolidated financial position of the Group;
other auditors and the financial statements
certified by the management of the associate. Provision has been made in the consolidated
financial statements, as required under the
Report on Other Legal and Regulatory Requirements
applicable law or accounting standards, for
As required by Section 143(3) of the Act, based on our material foreseeable losses, if any, on long-
audit and on the consideration of the report of the other term contracts including derivative
auditors on separate financial statements of a contracts;
subsidiary referred to in paragraph 5 above we report,
There has been no delay in transferring amounts,
to the extent applicable, that:
required to be transferred, to the Investor
We have sought and obtained all the information and Education and Protection Fund by the
explanations which to the best of our knowledge Holding Company and its subsidiary
and belief were necessary for the purposes of our companies.
audit of the aforesaid consolidated financial
statements. For Deloitte Haskins & Sells
In our opinion, proper books of account as required by law Chartered Accountants (Firm’s
relating to preparation of the aforesaid consolidated Registration No. 117365W)
financial statements have been kept so far as it
appears from our examination of those books and
the report of the other auditors.
Porus B. Pardiwalla
The Consolidated Balance Sheet, the Consolidated
Partner
Statement of Profit and Loss, and the Consolidated
(Membership No. 40005)
Cash Flow Statement dealt with by this Report are in
agreement with the relevant books of account Mumbai
maintained for the purpose of preparation of the April 21, 2017
consolidated financial statements.

HDFC Bank Limited Annual Report 2016-17 145


ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S An audit involves performing procedures to obtain audit
REPORT evidence about the adequacy of the internal financial controls
system over financial reporting and their operating
(Referred to in paragraph f under ‘Report on Other Legal effectiveness. Our audit of internal financial controls over
and Regulatory Requirements’ section of the auditor’s financial reporting included obtaining an understanding of
report of even date) internal financial controls over financial reporting, assessing
the risk that a material weakness exists, and testing and
Report on the Internal Financial Controls Over Financial
evaluating the design and operating effectiveness of internal
Reporting under Clause (i) of Sub-section 3 of Section
control based on the assessed risk. The procedures selected
143 of the Companies Act, 2013 (“the Act”)
depend on the auditor’s judgement, including the assessment
In conjunction with our audit of the consolidated financial of the risks of material misstatement of the financial
statements of the Holding Company for the year as of and for statements, whether due to fraud or error.
the year ended 31st March, 2017 we have audited the
We believe that the audit evidence we have obtained and the
internal financial controls over financial reporting of the
audit evidence obtained by the other auditors, in terms of
Group [See paragraphs 1 and 5 of our Report on the
their report referred to in paragraph 5 of our Report on the
Consolidated Financial Statements].
Consolidated Financial Statements, is sufficient and
Management’s Responsibility for Internal Financial appropriate to provide a basis for our audit opinion on the
Controls internal financial controls system over financial reporting of
the Holding Company and its subsidiary companies, which
The respective Board of Directors of the Holding company and are companies incorporated in India.
its subsidiary companies and its associate company, are
responsible for establishing and maintaining internal financial Meaning of Internal Financial Controls Over Financial
controls based on the internal control over financial reporting Reporting
criteria established by the respective Companies considering the
A company’s internal financial control over financial reporting
essential components of internal control stated in the Guidance
is a process designed to provide reasonable assurance
Note on Audit of Internal Financial Controls Over Financial
regarding the reliability of financial reporting and the
Reporting (“the Guidance Note”) issued by the Institute of
preparation of financial statements for external purposes in
Chartered Accountants of India (“ICAI”). These responsibilities
accordance with generally accepted accounting principles. A
include the design, implementation and maintenance of
company’s internal financial control over financial reporting
adequate internal financial controls that were operating
effectively for ensuring the orderly and efficient conduct of its
includes those policies and procedures that (1) pertain to the
business, including adherence to the respective company’s maintenance of records that, in reasonable detail, accurately
policies, the safeguarding of its assets, the prevention and and fairly reflect the transactions and dispositions of the
detection of frauds and errors, the accuracy and completeness of assets of the company; (2) provide reasonable assurance that
the accounting records, and the timely preparation of reliable transactions are recorded as necessary to permit preparation
financial information, as required under the Companies Act, of financial statements in accordance with generally accepted
2013, the Banking Regulation Act, 1949 and the guidelines accounting principles, and that receipts and expenditures of
issued by the Reserve Bank of India. the company are being made only in accordance with
authorisations of management and directors of the company;
Auditor’s Responsibility and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorised acquisition, use, or
Our responsibility is to express an opinion on the internal disposition of the company’s assets that could have a material
financial controls over financial reporting, based on our audit. effect on the financial statements.
We conducted our audit in accordance with the Guidance
Note issued by the Institute of Chartered Accountants of India Inherent Limitations of Internal Financial Controls Over
and the Standards on Auditing, prescribed under Section Financial Reporting
143(10) of the Companies Act, 2013, to the extent applicable
Because of the inherent limitations of internal financial controls
to an audit of internal financial controls. Those Standards and
the Guidance Note require that we comply with ethical over financial reporting, including the possibility of collusion or
requirements and plan and perform the audit to obtain improper management override of controls, material
reasonable assurance about whether adequate internal misstatements due to error or fraud may occur and not be
financial controls over financial reporting was established and detected. Also, projections of any evaluation of the internal
maintained and if such controls operated effectively in all financial controls over financial reporting to future periods are
material respects. subject to the risk that the internal financial control

HDFC Bank Limited Annual Report 2016-17 146


over financial reporting may become inadequate because of Our opinion is not modified in respect of the matters referred
changes in conditions, or that the degree of compliance with to in paragraph 5 of our Report on the Consolidated Financial
the policies or procedures may deteriorate. Statements.
Opinion

In our opinion to the best of our information and according to For Deloitte Haskins & Sells
the explanations given to us and based on the matters Chartered Accountants (Firm’s
referred to in paragraph 5 of our Report on the Consolidated Registration No. 117365W)
Financial Statements, the Group has in all material respects,
an adequate internal financial controls system over financial
reporting and such internal financial controls over financial Porus B. Pardiwalla
reporting were operating effectively as at 31st March, 2017, Partner
based on the essential components of internal control stated (Membership No. 40005)
in the Guidance Note on Audit of Internal Financial Controls
Over Financial Reporting issued by the Institute of Chartered Mumbai
Accountants of India. April 21, 2017

HDFC Bank Limited Annual Report 2016-17 147


Consolidated Balance Sheet
As at March 31, 2017
` in ‘000
As at As at
Schedule 31-Mar-17 31-Mar-16
CAPITAL AND LIABILITIES
Capital 1 5,125,091 5,056,373
Reserves and surplus 2 912,814,397 737,984,869
Minority interest 2A 2,914,389 1,806,228
Deposits 3 6,431,342,479 5,458,732,889
Borrowings 4 984,156,439 1,037,139,597
Other liabilities and provisions 5 587,088,812 381,403,308

Total 8,923,441,607 7,622,123,264


ASSETS

Cash and balances with Reserve Bank of India 6 379,105,485 300,765,846


Balances with banks and money at call and short notice 7 114,005,711 89,922,969
Investments 8 2,107,771,120 1,936,338,475
Advances 9 5,854,809,871 4,872,904,174
Fixed assets 10 38,146,997 34,796,976
Other assets 11 429,602,423 387,394,824

Total 8,923,441,607 7,622,123,264

Contingent liabilities 12 8,182,842,892 8,535,273,826

Bills for collection 308,480,352 234,899,997


Significant accounting policies and notes to the Consolidated financial 17 & 18

statements
The schedules referred to above form an integral part of the
Consolidated Balance Sheet
As per our report of even date.
For Deloitte Haskins & Sells Shyamala Gopinath Aditya Puri Anami Roy
Chartered Accountants Chairperson Managing Director Bobby Parikh
Keki Mistry
P. B. Pardiwalla Paresh Sukthankar Kaizad Bharucha Malay Patel
Partho Datta
Partner Deputy Managing Director Executive Director
Membership No.: 40005 Renu Karnad
Srikanth Nadhamuni
Sanjay Dongre Sashidhar Jagdishan
Umesh Sarangi
Executive Vice President Chief Financial Officer
Directors
Mumbai, April 21, 2017 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2016-17 148


Consolidated Statement of Profit and Loss
For the year ended March 31, 2017
` in ‘000
Year ended Year ended
Schedule 31-Mar-17 31-Mar-16
I INCOME
Interest earned 13 732,713,529 631,615,614
Other income 14 128,776,329 112,116,541
Total 861,489,858 743,732,155
II EXPENDITURE
Interest expended 15 380,415,844 340,695,748
Operating expenses 16 207,510,707 178,318,808
Provisions and contingencies 120,689,285 96,544,349
Total 708,615,836 615,558,905
III PROFIT
Net profit for the year 152,874,022 128,173,250
Less: Minority interest 367,165 197,212
Add: Share in profits of associates 23,393 37,278
Consolidated profit for the year attributable to the Group 152,530,250 128,013,316
Impact on amalgamation [Refer Schedule 18(1)] 274,507 -
Balance in Profit and Loss account brought forward 248,255,886 195,508,642
Total 401,060,643 323,521,958
IV APPROPRIATIONS
Transfer to Statutory Reserve 37,771,634 31,809,345
Proposed dividend [Refer Schedule 18(3)] - 24,017,772
Tax (including cess) on interim / proposed dividend 255,959 5,123,529
Dividend (including tax / cess thereon) pertaining to previous year (16,909) (117,135)
paid during the year, net of dividend tax credits
Transfer to General Reserve 14,549,641 12,296,213
Transfer to Capital Reserve 3,134,100 2,221,532
Transfer to / (from) Investment Reserve Account 42,934 (85,184)
Balance carried over to Balance Sheet 345,323,284 248,255,886
Total 401,060,643 323,521,958
VEARNINGS PER EQUITY SHARE (Face value ` 2 per share) ` `
Basic 59.95 50.85
Diluted 59.16 50.24
Significant accounting policies and notes to the
Consolidated financial statements 17 & 18
The schedules referred to above form an integral part of the
Consolidated Statement of Profit and Loss
As per our report of even date.
For Deloitte Haskins & Sells Shyamala Gopinath Aditya Puri Anami Roy
Chartered Accountants Chairperson Managing Director Bobby Parikh
Keki Mistry
P. B. Pardiwalla Paresh Sukthankar Kaizad Bharucha Malay Patel
Partner Deputy Managing Director Executive Director Partho Datta
Membership No.: 40005 Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Srikanth Nadhamuni
Executive Vice President Chief Financial Officer Umesh Sarangi
Mumbai, April 21, 2017 (Legal) & Company Secretary Directors

HDFC Bank Limited Annual Report 2016-17 149


Consolidated Cash Flow Statement
For the year ended March 31, 2017

` in ‘000
Year ended Year ended
31-Mar-17 31-Mar-16
Cash flows from operating activities

Consolidated profit before income tax 233,311,478 194,949,948

Adjustments for:

Depreciation on fixed assets 8,861,876 7,380,326

(Profit) / loss on revaluation of investments (87,543) 173,689

Amortisation of premia on held to maturity investments 1,756,569 1,002,801

(Profit) / loss on sale of fixed assets 16,229 1,185

Provision / charge for non performing assets 37,024,296 25,179,864

Provision for dimunition in value of Investments (76,417) 146,543

Floating provisions 250,000 1,150,000

Provision for standard assets 4,312,322 4,648,890

Contingency provisions 388,440 218,602

Share in current year's profits of associates (23,393) (37,278)

285,733,857 234,814,570
Adjustments for:

(Increase) / decrease in investments (excluding investments in subsidiaries) (173,257,700) (391,159,616)

(Increase) / decrease in advances (1,018,904,990) (1,066,012,996)

Increase / (decrease) in deposits 972,609,590 955,896,412

(Increase) / decrease in other assets (44,855,329) (38,485,747)

Increase / (decrease) in other liabilities and provisions 228,337,692 31,324,658

249,663,120 (273,622,719)
Direct taxes paid (net of refunds) (76,847,189) (70,730,944)

Net cash flow (used in) / from operating activities 172,815,931 (344,353,663)
Cash flows used in investing activities

Purchase of fixed assets (11,577,570) (8,771,635)

Proceeds from sale of fixed assets 100,768 116,125

Investment in subsidiaries and / or joint ventures - -

Net cash used in investing activities (11,476,802) (8,655,510)

HDFC Bank Limited Annual Report 2016-17 150


Consolidated Cash Flow Statement
For the year ended March 31, 2017

` in ‘000
Year ended Year ended
31-Mar-17 31-Mar-16
Cash flows from financing activities
Increase in minority interest 818,605 189,954

Money received on exercise of stock options by employees 22,615,161 12,229,008

Increase / (decrease) in borrowings (excluding subordinate debt, (33,898,658) 402,081,134

perpetual debt and upper tier II instruments)


Redemption of subordinated debt (19,084,500) (12,020,000)

Dividend paid during the year (24,083,093) (20,091,666)

Tax on dividend (5,297,258) (4,237,089)

Net cash generated from financing activities (58,929,743) 378,151,341

Effect of exchange fluctuation on translation reserve (282,622) 282,433

Cash and cash equivalents on amalgamation [Refer Schedule 18(1)] 295,617 -

Net increase / (decrease) in cash and cash equivalents 102,422,381 25,424,601

Cash and cash equivalents as at April 1st (Schedules 6 and 7) 390,688,815 365,264,214
Cash and cash equivalents as at March 31st (Schedules 6 and 7) 493,111,196 390,688,815

As per our report of even date. For and on behalf of the Board
For Deloitte Haskins & Sells Shyamala Gopinath Aditya Puri Anami Roy

Chartered Accountants Chairperson Managing Director Bobby Parikh


Keki Mistry
P. B. Pardiwalla Malay Patel
Paresh Sukthankar Kaizad Bharucha Partho Datta
Partner
Deputy Managing Director Executive Director Renu Karnad
Membership No.: 40005
Srikanth Nadhamuni
Sanjay Dongre Sashidhar Jagdishan Umesh Sarangi
Executive Vice President Chief Financial Officer Directors
Mumbai, April 21, 2017 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2016-17 151


Schedules to the Consolidated Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 1 - CAPITAL
Authorised capital
3,25,00,00,000 (31 March, 2016: 2,75,00,00,000) Equity Shares of ` 2/- each 6,500,000 5,500,000
Issued, subscribed and paid-up capital
2,56,25,45,717 (31 March, 2016: 2,52,81,86,517) Equity Shares of ` 2/- each 5,125,091 5,056,373
Total 5,125,091 5,056,373
SCHEDULE 2 - RESERVES AND SURPLUS
I Statutory reserve
Opening balance 149,931,567 118,122,222
Additions during the year 37,771,634 31,809,345
Total 187,703,201 149,931,567
II General reserve
Opening balance 57,369,509 45,073,296
Additions during the year 14,549,641 12,296,213
Total 71,919,150 57,369,509

III Balance in profit and loss account 345,323,284 248,255,886


IV Share premium account

Opening balance 262,204,646 250,019,020


Additions during the year 22,546,443 12,185,626
Total 284,751,089 262,204,646
V Amalgamation reserve
Opening balance 10,635,564 10,635,564
Additions during the year - -
Total 10,635,564 10,635,564
VI Capital reserve
Opening balance 8,866,583 6,645,051
Additions during the year 3,134,100 2,221,532
Total 12,000,683 8,866,583
VII Investment reserve account
Opening balance 399,084 484,268
Additions during the year 109,506 76
Deductions during the year (66,572) (85,260)
Total 442,018 399,084
VIII Foreign currency translation account
Opening balance 322,030 39,597
Additions / (deductions) during the year (282,622) 282,433
Total 39,408 322,030
Total 912,814,397 737,984,869

HDFC Bank Limited Annual Report 2016-17 152


Schedules to the Consolidated Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 2A - MINORITY INTEREST
Minority interest at the date on which parent subsidiary relationship came into
276,029 276,029
existence
Subsequent increase 2,638,360 1,530,199
Total 2,914,389 1,806,228
Includes reserves of Employee Welfare Trust of ` 70.83 crore (previous year ` 63.85 crore)
SCHEDULE 3 - DEPOSITS
A I Demand deposits
(i) From banks 20,806,377 22,017,200
(ii) From others 1,132,892,089 860,725,166
Total 1,153,698,466 882,742,366
II Savings bank deposits 1,935,786,271 1,478,861,198
III Term deposits
(i) From banks 53,520,609 25,095,540
(ii) From others 3,288,337,133 3,072,033,785
Total 3,341,857,742 3,097,129,325
Total 6,431,342,479 5,458,732,889
B I Deposits of branches in India 6,391,351,770 5,391,562,781

II Deposits of branches outside India 39,990,709 67,170,108


Total 6,431,342,479 5,458,732,889
SCHEDULE 4 - BORROWINGS
Borrowings in India
(i) Reserve Bank of India - 319,505,077
(ii) Other banks 97,371,546 98,174,819
(iii) Other institutions and agencies 249,710,383 91,767,811
(iv) Upper and lower Tier II capital and innovative perpetual debts 149,020,000 157,579,000
(v) Bonds and Debentures (excluding subordinated debt) 252,038,000 59,750,000
Total 748,139,929 726,776,707
II Borrowings outside India* 236,016,510 310,362,890
Total 984,156,439 1,037,139,597
*Includes Upper Tier II debt of Nil crore (previous year: ` 662.55 crore)
Secured borrowings included in I & II above: ` 20,606.90 crore (previous year: ` 15,781.77 crore)

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS


I Bills payable 166,670,863 73,784,974
II Interest accrued 45,914,476 40,976,952
III Others (including provisions) 349,467,514 216,913,280
IV Contingent provisions against standard assets 25,035,959 20,735,354
V Proposed dividend (including tax on dividend) [Refer Schedule 18(3) - 28,992,748
Total 587,088,812 381,403,308

HDFC Bank Limited Annual Report 2016-17 153


Schedules to the Consolidated Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
I Cash in hand (including foreign currency notes) 42,772,675 55,877,336
II Balances with Reserve Bank of India:
(a) In current accounts 284,332,810 242,888,510
(b) In other accounts 52,000,000 2,000,000
Total 336,332,810 244,888,510
Total 379,105,485 300,765,846
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
In India
Balances with banks:
(a) In current accounts 5,531,745 2,596,227
(b) In other deposit accounts 9,716,581 7,926,585
Total 15,248,326 10,522,812
(ii) Money at call and short notice:
(a) With banks - -
(b) With other institutions - 1,359,867
Total - 1,359,867
Total 15,248,326 11,882,679
II Outside India
(i) In current accounts 36,772,777 23,909,955
(ii) In deposit accounts 2,529,150 3,776,535
(iii) Money at call and short notice 59,455,458 50,353,800
Total 98,757,385 78,040,290
Total 114,005,711 89,922,969
SCHEDULE 8 - INVESTMENTS
Investments in India in
(i) Government securities 1,624,186,994 1,576,610,655
(ii) Other approved securities - -
(iii) Shares 1,219,528 885,214
(iv) Debentures and bonds 187,956,872 48,882,174
(v) Investment in associates* 402,955 614,020
(vi) Others (Units, CDs / CPs, PTCs and security receipts) 282,824,625 295,619,657
Total 2,096,590,974 1,922,611,720
*Includes goodwill of ` 0.70 crore (previous year: ` 0.70 crore) and capital reserve of Nil on
account of investment in associates (previous year: ` 0.43 crore)
Investments outside India in
Other investments
(a) Shares 28,375 28,375
(b) Debentures and bonds 11,151,771 13,698,380
Total 11,180,146 13,726,755
Total 2,107,771,120 1,936,338,475

HDFC Bank Limited Annual Report 2016-17 154


Schedules to the Consolidated Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
Investments
Gross value of investments
(a) In India 2,097,219,426 1,923,817,098
(b) Outside India 11,206,487 13,726,755
Total 2,108,425,913 1,937,543,853
Provision for depreciation
(a) In India 628,452 1,205,378
(b) Outside India 26,341 -
Total 654,793 1,205,378
Net value of investments
(a) In India 2,096,590,974 1,922,611,720
(b) Outside India 11,180,146 13,726,755
Total 2,107,771,120 1,936,338,475
SCHEDULE 9 - ADVANCES
A (i) Bills purchased and discounted 287,159,641 185,136,903
(ii) Cash credits, overdrafts and loans repayable on demand 1,336,174,162 1,242,774,115
(iii) Term loans 4,231,476,068 3,444,993,156
Total 5,854,809,871 4,872,904,174
B (i) Secured by tangible assets* 4,351,900,473 3,648,290,355

(ii) Covered by bank / government guarantees 107,864,309 114,128,823


(iii) Unsecured 1,395,045,089 1,110,484,996
Total 5,854,809,871 4,872,904,174
* Including advances against book debts

IAdvances in India
(i) Priority sector 1,646,022,483 1,427,201,985
(ii) Public sector 157,741,065 134,556,082
(iii) Banks 9,092,668 4,659,631
(iv) Others 3,843,921,442 2,985,578,949
Total 5,656,777,658 4,551,996,647
IIAdvances outside India
(i)Due from banks 6,500,391 6,879,777
Due from others
(a) Bills purchased and discounted 2,560,707 1,245,263
(b) Syndicated loans 17,845,564 38,624,247
(c) Others 171,125,551 274,158,240
Total 198,032,213 320,907,527
(Advances are net of provisions) Total 5,854,809,871 4,872,904,174

HDFC Bank Limited Annual Report 2016-17 155


Schedules to the Consolidated Financial Statements
As at March 31, 2017
` in ‘000
As at As at
31-Mar-17 31-Mar-16
SCHEDULE 10 - FIXED ASSETS
Premises (including land)
Gross block
At cost on 31 March of the preceding year 15,785,543 15,030,782
Additions during the year 669,452 839,927
Deductions during the year (70,347) (85,166)

Total 16,384,648 15,785,543


Depreciation
As at 31 March of the preceding year 4,262,700 3,775,762
Charge for the year 595,216 555,657
On deductions during the year (59,060) (68,719)

Total 4,798,856 4,262,700


Net block 11,585,792 11,522,843
B Other fixed assets (including furniture and fixtures)
Gross block
At cost on 31 March of the preceding year 74,900,241 67,150,536
Additions on amalgamation 377,694 -
Additions during the year 11,525,792 9,208,628
Deductions during the year (2,229,417) (1,458,923)

Total 84,574,310 74,900,241


Depreciation
As at 31 March of the preceding year 51,626,108 46,156,112
Additions on amalgamation 245,859 -
Charge for the year 8,264,659 6,828,000
On deductions during the year (2,123,521) (1,358,004)

Total 58,013,105 51,626,108


Net block 26,561,205 23,274,133
C Assets on lease (plant and machinery)
Gross block
At cost on 31 March of the preceding year 4,546,923 4,546,923
Additions during the year - -

Total 4,546,923 4,546,923

HDFC Bank Limited Annual Report 2016-17 156


Schedules to the Consolidated Financial Statements
As at March 31, 2017

` in ‘000
As at As at
31-Mar-17 31-Mar-16
Depreciation
As at 31 March of the preceding year 4,104,467 4,104,467

Charge for the year - -

Total 4,104,467 4,104,467


Lease adjustment account
As at 31 March of the preceding year 442,456 442,456

Charge for the year - -

Total 442,456 442,456


Unamortised cost of assets on lease - -
Total 38,146,997 34,796,976
SCHEDULE 11 - OTHER ASSETS
I Interest accrued 83,177,119 75,547,122
II Advance tax / tax deducted at source (net of provisions) 17,270,130 17,625,441
III Stationery and stamps 267,871 220,786
IV Non banking assets acquired in satisfaction of claims - -
V Bond and share application money pending allotment - -
VI Security deposit for commercial and residential property 5,095,162 4,791,869
VII Others * 323,792,141 289,209,606

Total 429,602,423 387,394,824

*Includes deferred tax asset (net) of ` 2,587.06 crore (previous year: ` 2,227.23 crore), goodwill
of ` 185.00 crore (previous year: ` 187.16 crore) and deposits placed with NABARD / SIDBI
NHB on account of shortfall in lending to priority sector of ` 11,882.37 crore (previous year: `
13,719.68 crore)
SCHEDULE 12 - CONTINGENT LIABILITIES
I Claims against the bank not acknowledged as debts - taxation 10,724,100 11,879,900
II Claims against the bank not acknowledged as debts - others 2,010,238 777,310
III Liability on account of outstanding forward exchange contracts 4,699,301,366 5,290,757,746
IV Liability on account of outstanding derivative contracts 2,723,068,634 2,570,471,528

Guarantees given on behalf of constituents


- in India 366,232,012 301,310,742
- outside India 953,405 31,094,714
VI Acceptances, endorsements and other obligations 359,613,744 317,525,754
VII Other items for which the Bank is contingently liable 20,939,393 11,456,132

Total 8,182,842,892 8,535,273,826

HDFC Bank Limited Annual Report 2016-17 157


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017

` in ‘000
Year ended Year ended
31-Mar-17 31-Mar-16
SCHEDULE 13 - INTEREST EARNED
I Interest / discount on advances / bills 559,861,841 477,361,879
II Income from investments 159,515,563 141,254,962
III Interest on balance with RBI and other inter-bank funds 5,448,567 3,751,556
IV Others 7,887,558 9,247,217

Total 732,713,529 631,615,614


SCHEDULE 14 - OTHER INCOME
I Commission, exchange and brokerage 94,767,987 83,067,577
II Profit / (loss) on sale of investments (net) 11,447,093 7,525,247
III Profit / (loss) on revaluation of investments (net) 87,543 (173,689)
IV Profit / (loss) on sale of building and other assets (net) (16,229) (1,185)
V Profit / (loss) on exchange / derivative transactions (net) 12,633,895 12,277,267
VI Miscellaneous income 9,856,040 9,421,324

Total 128,776,329 112,116,541


SCHEDULE 15 - INTEREST EXPENDED
I Interest on deposits 312,955,921 291,509,468
II Interest on RBI / inter-bank borrowings 65,834,950 33,664,532
III Other interest 1,624,973 15,521,748

Total 380,415,844 340,695,748


SCHEDULE 16 - OPERATING EXPENSES
I Payments to and provisions for employees 85,047,014 63,061,367
II Rent, taxes and lighting 14,305,273 12,740,606
III Printing and stationery 4,773,398 4,251,803
IV Advertisement and publicity 2,095,018 2,584,338
V Depreciation on bank's property 8,861,876 7,380,326
VI Directors' fees / remuneration, allowances and expenses 35,221 28,861
VII Auditors' fees and expenses 25,758 19,331
VIII Law charges 1,249,095 998,702
IX Postage, telegram, telephone etc. 4,491,632 4,217,982
X Repairs and maintenance 12,717,968 10,417,860
XI Insurance 6,914,913 5,618,738
XII Other expenditure* 66,993,541 66,998,894

Total 207,510,707 178,318,808

*Includes professional fees, commission to sales agents, card and merchant acquiring expenses and
system management fees.

HDFC Bank Limited Annual Report 2016-17 158


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
SCHEDULE 17 - Significant accounting policies appended to and forming part of the consolidated financial statements
for the year ended March 31, 2017
BACKGROUND
HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company engaged
in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations.
The Bank is governed by the Banking Regulation Act, 1949 and the Companies Act, 2013. The Bank has overseas branch
operations in Bahrain, Hong Kong and Dubai. The financial accounting systems of the Bank are centralised and, therefore,
accounting returns are not required to be submitted by branches of the Bank.
HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL) are subsidiaries of the Bank. HDBFSL is a
non-deposit taking non-banking finance company. HSL is a financial services provider along with broking as a core product.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries constituting the
‘Group’ and ‘Group’s’ share of profits of associates.
The Bank consolidates its subsidiaries in accordance with Accounting Standard (‘AS’) 21, Consolidated Financial
Statements, specified under Section 133 of the Companies Act, 2013, on a line-by-line basis by adding together the like
items of assets, liabilities, income and expenditure. Capital reserve / Goodwill on consolidation represent the difference
between the Bank’s share in the net worth of the subsidiary and the cost of acquisition at the time of making the investment
in the subsidiary. Further, the Bank accounts for investments in associates under equity method of accounting in accordance
with AS-23, Accounting for Investments in Associates in Consolidated Financial Statements, specified under Section 133 of
the Companies Act, 2013.
BASIS OF PREPARATION
The consolidated financial statements have been prepared and presented under the historical cost convention and accrual
basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India
(‘GAAP’), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the
Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) specified under Section 133 of the Companies
Act, 2013, in so far as they apply to banks and current practices prevailing within the banking industry in India.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires the management to make estimates
and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date
of the financial statements and the reported income and expenses for the reporting period. Management believes that the
estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from
these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods.
Basis of consolidation
The consolidated financial statements present the accounts of HDFC Bank Limited with its following subsidiaries and associate:

Name Relation Country of Ownership


incorporation interest**
HDFC Securities Limited Subsidiary India 97.9%
HDB Financial Services Limited Subsidiary India 96.2%

International Asset Reconstruction Company Private Limited Associate India 29.4%

HDB Employee Welfare Trust * India

The accounts of HDB Employee Welfare Trust, a trust established for providing general welfare measures such as medical
relief and educational assistance to the employees of the Bank and their dependents has been entirely consolidated.
Denotes HDFC Bank’s direct interest.

HDFC Bank Limited Annual Report 2016-17 159


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
During the year ended March 31, 2017, Atlas Documentary Facilitators Company Private Limited and HBL Global Private
Limited, associates of the Bank as at March 31, 2016, amalgamated with HDB Financial Services Limited, pursuant to the
approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of
the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, the consolidated financial statements include
the effect of the said amalgamation.
During the year ended March 31, 2017 the Bank’s shareholding in HDB Financial Services Limited decreased from 97.1% to
96.2% on account of the said amalgamation and stock options exercised by minority stakeholders.
The audited financial statements of the subsidiary companies, entity controlled by the Bank and the un-audited financial
statements of an associate have been drawn up to the same reporting date as that of the Bank, i.e. March 31, 2017.
PRINCIPAL ACCOUNTING POLICIES
1Investments HDFC
Bank Limited
Classification:
In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase
into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter called “categories”).
Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under each of these categories,
investments are further classified under six groups (hereinafter called “groups”) - Government Securities, Other Approved Securities,
Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments.
Purchase and sale transactions in securities are recorded under ‘Settlement Date’ of accounting, except in the case of equity
shares where ‘Trade Date’ accounting is followed.
Basis of classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.
Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of
subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not
classified in either of the above categories are classified under AFS category.
Acquisition cost:
Brokerage, commission, etc. and broken period interest on debt instruments are recognised in the Statement of Profit and
Loss and are not included in the cost of acquisition.
Disposal of investments:
Profit / Loss on sale of investments under the aforesaid three categories is recognised in the Statement of Profit and Loss.
Cost of investments is based on the weighted average cost method. The profit from sale of investment under HTM category,
net of taxes and transfer to statutory reserve is appropriated from Statement of Profit and Loss to “Capital Reserve” in
accordance with the RBI Guidelines.
Short sale:
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The
short position is reflected as the amount received on sale and is classified under ‘Other Liabilities’. The short position is
marked to market and loss, if any, is charged to the Statement of Profit and Loss while gain, if any, is ignored. Profit / Loss on
settlement of the short position is recognised in the Statement of Profit and Loss.
Valuation:
Investments classified under AFS and HFT categories are marked to market as per the RBI guidelines.
Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices
declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives
Association (‘FIMMDA’), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’)
included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA.

HDFC Bank Limited Annual Report 2016-17 160


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
The valuation of other unquoted fixed income securities (viz. State Government securities, other approved securities, bonds
and debentures) and preference shares, is done with a mark-up (reflecting associated credit and liquidity risk) over the YTM
rates for government securities published by FIMMDA.
Special bonds such as oil bonds, fertilizer bonds etc. which are directly issued by Government of India (‘GOI’) that do not
qualify for SLR are also valued by applying the mark-up above the corresponding yield on GOI securities.
Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per the RBI
guidelines.
Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.
Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost and
stated at acquisition cost.
Security receipts are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to
time.
Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the Statement of
Profit and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent of depreciation
already provided. The valuation of investments includes securities under repo transactions. The book value of individual
securities is not changed after the valuation of investments.
Investments classified under HTM category are carried at their acquisition cost and not marked to market. Any premium on
acquisition is amortised over the remaining maturity period of the security on a constant yield to maturity basis. Such
amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI
guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for.
Non-performing investments are identified and depreciation / provision are made thereon based on the RBI guidelines. The
depreciation / provision on such non-performing investments are not set off against the appreciation in respect of other
performing securities. Interest on non-performing investments is not recognised in the Statement of Profit and Loss until
received.
Repo and reverse repo transactions:
In accordance with the RBI guidelines, repurchase and reverse repurchase transactions in government securities and
corporate debt securities are reflected as borrowing and lending transactions respectively.
Borrowing cost on repo transactions is accounted for as interest expense and revenue on reverse repo transactions is
accounted for as interest income.
HDFC Securities Limited
Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such
investments are made, are classified as current investments. All other investments are classified as long term investments.
Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However,
provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction
being determined and made for each investment individually.
HDB Financial Services Limited
Investments expected to mature after twelve months are taken as long term / non-current investment and stated at cost.
Provision is recognised only in case of diminution, which is other than temporary in nature. Investments maturing within three
months from the date of acquisition are classified as cash equivalents if they are readily convertible into cash. All other
investment are recognised as short term / current investments and are valued at lower of cost and net realisable value.
Interest on borrowings is recognised in Statement of Profit and Loss on an accrual basis. Costs associated with borrowings
are grouped under financial charges along with the interest costs.
HDB Employees Welfare Trust
Long-term investments are stated at cost of acquisition. Provision for diminution is made if such diminution is considered as
being other than temporary in nature.

HDFC Bank Limited Annual Report 2016-17 161


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Advances
HDFC Bank Limited
Classification:
Advances are classified as performing and non-performing based on the RBI guidelines and are stated net of bills
rediscounted, inter-bank participation with risk, specific provisions, interest in suspense for non-performing advances, claims
received from Export Credit Guarantee Corporation, provisions for funded interest term loan classified as non-performing
advances and provisions in lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is
transferred to an interest suspense account and not recognised in the Statement of Profit and Loss until received.
Provisioning:
Specific loan loss provisions in respect of non-performing advances are made based on management’s assessment of the
degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI.
The specific provision levels for retail non-performing assets are also based on the nature of product and delinquency levels.
Specific loan loss provisions in respect of non-performing advances are charged to the Statement of Profit and Loss and
included under Provisions and Contingencies.
In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier
reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large
Credits (CRILC). Accelerated provision is also made on non-performing advances which are erstwhile SMA-2 accounts with
Aggregate Exposure (AE) ` 1,000 million or above and Joint Lenders’ Forum (JLF) is not formed or they fail to agree upon a
common Corrective Action Plan (CAP) within the stipulated time frame.
Non-performing advances are written-off in accordance with the Bank’s policies. Recoveries from bad debts written-off are
recognised in the Statement of Profit and Loss and included under other income.
In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire
amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts.
The Bank maintains general provision for standard assets including credit exposures computed as per the current marked to
market values of interest rate and foreign exchange derivative contracts and gold in accordance with the guidelines and at
levels stipulated by RBI from time to time. In the case of overseas branches, general provision on standard advances is
maintained at the higher of the levels stipulated by the respective overseas regulator or RBI. Provision for standard assets is
included under other liabilities.
Provisions made in excess of the Bank’s policy for specific loan loss provisions for non-performing assets and regulatory
general provisions are categorised as floating provisions. Creation of floating provisions is considered by the Bank up to a
level approved by the Board of Directors. In accordance with the RBI guidelines, floating provisions are used up to a level
approved by the Board only for contingencies under extraordinary circumstances and for making specific provisions for
impaired accounts as per these guidelines or any regulatory guidance / instructions. Floating provisions are included under
other liabilities.
Further to the provisions required to be held according to the asset classification status, provisions are held for individual country
exposures (other than for home country exposure). Countries are categorised into risk categories as per Export Credit Guarantee
Corporation of India Ltd. (‘ECGC’) guidelines and provisioning is done in respect of that country where the net funded exposure is
one percent or more of the Bank’s total assets. Provision for country risk is included under other liabilities.
In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs,
but has reasons to believe on the basis of the extant environment or specific information or basis regulatory guidance /
instructions, of a possible slippage of a specific advance or a group of advances or exposures or potential exposures. These
are classified as contingent provisions and included under other liabilities.
The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s
financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would
normally involve modification of terms of the advance / securities, which would generally include, among others, alteration of
repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive
reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the

HDFC Bank Limited Annual Report 2016-17 162


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
restructuring package. Necessary provision for diminution in the fair value of a restructured account is made and
classification thereof is as per the extant RBI guidelines. Restructuring of an account is done at a borrower level.
HDB Financial Services Limited
Classification:
Advances are classified as standard, sub-standard and doubtful assets as per the Company policy approved by the Board.
The rates applied for making provisions on non-performing advances are higher than those required by the relevant RBI
guidelines. Interest on non-performing advances is transferred to an interest suspense account and not recognised in the
Statement of Profit and Loss until received. Loan assets are recognised on disbursement of loan and in case of new asset
financing on the transfer of ownership.
Provisioning:
The Company assesses all receivables for their recoverability and accordingly recognises provision for non-performing and
doubtful assets as per approved Company policies and guidelines. The Company ensures provisions made are not lower
than as stipulated by RBI guidelines.
The Company provides 0.35% on standard assets as stipulated by Circular No. DNBR (PD) CC.No.002/03.10.001/2014-15
dated November 10, 2014 issued by RBI under the head “Contingent Provision against Standard Assets”.
Loan origination costs:
Brokerage, commission, incentive to employee, etc. paid at the time of acquisition of loans are charged to revenue.
Securitisation and transfer of assets
HDFC Bank Limited
The Bank securitises out its receivables to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such
securitised-out receivables are de-recognised in the balance sheet when they are sold (true sale criteria being fully met with)
and consideration is received by the Bank. Sales / Transfers that do not meet these criteria for surrender of control are
accounted for as secured borrowings. In respect of receivable pools securitised-out, the Bank provides liquidity and credit
enhancements, as specified by the rating agencies, in the form of cash collaterals / guarantees and / or by subordination of
cash flows in line with RBI guidelines. The Bank also acts as a servicing agent for receivable pools securitised-out.
The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash flows, which are
similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables are
assigned directly to the purchaser and are not represented by Pass Through Certificates (‘PTCs’).
The RBI issued addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly,
the Bank does not provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to
these guidelines. The Bank amortises any profit received for every individual securitisation or direct assignment transaction
based on the method prescribed in these guidelines.
In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken
through the direct assignment route, the Bank continues to amortise the profit / premium that arose on account of sale of
receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets
issued vide its circular dated February 1, 2006.
Any loss arising on account of sale of receivables is recognised in the Statement of Profit and Loss for the period in which
the sale occurs in accordance with the said RBI guidelines.
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in
the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances
and where the Bank is participating, the aggregate amount of the participation is classified under advances. In the case of
participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and where
the Bank is participating, the aggregate amount of participation is shown as due from banks under advances.
The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a
sale transaction, the Bank sells the fulfillment of priority sector obligation and in the case of a purchase transaction the Bank
buys the fulfillment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets.

HDFC Bank Limited Annual Report 2016-17 163


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
The fee received for the sale of PSLCs is recorded as ‘Miscellaneous Income’ and the fee paid for purchase of the PSLCs is
recorded as ‘Other Expenditure’ in Statement of Profit and Loss.
In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value (i.e.,
book value less provisions held), the shortfall is charged to the Statement of Profit and Loss and if the sale is for a value
higher than the net book value, the excess provision is credited to the Statement of Profit and Loss in the year the amounts
are received.
The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classified as investments. The
Bank also buys loans through the direct assignment route which are classified as advances. These are carried at acquisition cost
unless it is more than the face value, in which case the premium is amortised over the tenor of the loans.
HDB Financial Services Limited
0RIOROTO )SSUANCE OF 2")"#IRCULAR DATEDT!UGUSTU
On receivables being assigned / securtised, the assets are de-recognised as all the rights, title, future receivables &
interest thereof are assigned to the purchaser.
Gains arising on assignment of receivables will be recognised at the end of the tenure of assignment contract as per
the RBI guidelines, while loss, if any is recognised upfront.
0OSTS)SSUANCE OF 2")"#IRCULAR DATEDT!UGUSTU
Securitised receivables are de-recognised in the balance sheet when they are sold i.e. they meet true sale criteria.
Gains arising out of securitisation of assets are recognised over the tenure of the securities issued by Special Purpose
Vehicle Trust (SPV).
The excess interest spread on the securitisation transactions are recognised in the Statement of Profit and Loss only
when it is redeemed in cash by the SPV after adjusting for overdue receivable for more than 90 days. Losses, if
any, are recognised upfront.
Fixed assets and depreciation
HDFC Bank Limited
Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of
purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is
ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit /
functioning capability from / of such assets.
Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The management believes
that the useful life of assets assessed by the Bank, pursuant to the Companies Act, 2013, taking into account changes in
environment, changes in technology, the utility and efficacy of the asset in use, fairly reflects its estimate of useful lives of the
fixed assets. The estimated useful lives of key fixed assets are given below:
Asset Estimated useful life Estimated useful
as assessed life specified under
by the Bank Schedule II of the
Companies Act, 2013
Owned Premises 61 years 60 years
Automated Teller Machines (‘ATMs’) 10 years 15 years
Electrical equipment and installations 6 to 10 years 10 years
Office equipment 3 to 6 years 5 years
Computers 3 years 3 years
Modems, routers, switches, servers, network and related IT equipment 3 to 6 years 6 years
Motor cars 4 years 8 years
Furniture and fittings 16 years 10 years
HDFC Bank Limited Annual Report 2016-17 164
Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
)MPROVEMENTS TO LEASEAHOLD PREMISES ARERCHARGEDROFFFOVER THEHREMAININGIPRIMARYYPERIODOOF LEASE
ss 3OFTWARERANDNSYSTEM DEVELOPMENT EXPENDITURE IS DEPRECIATEDCOVER A PERIODOOF ᄃ YEARS
ss0OINT OF SALE TERMINALS ARERFULLYLDEPRECIATEDCIN THEHYEARAOFFPURCHASE
ss&ORRASSETS PURCHASEDHANDNSOLD DURINGNTHEHYEAR
DEPRECIATION ISSPROVIDEDDON PRO
RATATBASISSBY THEH"ANK
ss7HENEVERRTHEREEIS AAREVISION OF THEHESTIMATEDMUSEFUL LIFEEOF AN ASSET
THEHUNAMORTISEDSDEPRECIABLE AMOUNT IS CHARGEDR over the revised remaining useful life of the said asset.

ss0ROlTOON SALE OF IMMOVABLE PROPERTY NETEOF TAXES ANDNTRANSFER TOOSTATUTORYYRESERVE


ARERTRANSFERREDRTO CAPITALIRESERVE account.
HDFC Securities Limited
Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any.
Cost comprises purchase price and expenses directly attributable to bringing the asset to its working condition for the
intended use. Subsequent expenditure related to an item of fixed asset are added to its book value only if it increases the
future benefits from the existing asset beyond its previously assessed standard of performance.
Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book
value and net realisable value and are shown separately in the financial statements.
Gains or losses arising from disposal or retirement of tangible fixed assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised net, within “Other Income” or “Other Expenses”,
as the case maybe, in the Statement of Profit and Loss in the year of disposal or retirement.
Capital work-in-progress are fixed assets which are not yet ready for their intended use. Such assets are carried at cost
comprising direct cost and related incidental expenses.
Depreciation is provided on a pro-rata basis to fully depreciate the assets using the straight-line method over the estimated
useful lives of the assets.
For the following categories of assets, depreciation on tangible fixed assets has been provided on the straight-line method as
per the useful life prescribed in Schedule II to the Companies Act, 2013:
Asset Estimated useful life

Computer hardware 3 years


Office equipment 5 years

Furniture and fixtures 10 years

Leasehold improvements Over the remaining period of the lease

Electricals 10 years

Office premises 60 years

For the following categories of assets, the Company has assessed useful life based on technical advice, taking into account
the nature of the asset, the estimates usage of asset, the operating condition of asset, anticipated technological changes and
utility in the business, as below:
Asset Estimated useful life

Vehicles 4 years
Network & servers 4 years

!LLLTANGIBLE ANDNINTANGIBLE ASSETS COSTINGTLESS THAN ` 5,000 individually are fully depreciated in the year of
purchase. ss 5SEFUL LIVES ARERREVIEWED AT EACH lNANCIAL YEARAENDNANDNADJUSTEDEIF APPROPRIATE
HDFC Bank Limited Annual Report 2016-17 165
Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
)NTANGIBLE ASSETS ARERSTATED AT ACQUISITIONSCOST
SNETEOF ACCUMULATED AMORTISATION ANDNACCUMULATED IMPAIRMENT LOSSES
if any.

#OST OF AN INTANGIBLE ASSETSINCLUDES PURCHASE PRICE


NON
REFUNDABLE TAXES ANDNDUTIES ANDNANYYOTHERHDIRECTLY ATTRIBUTABLE expenditure on making the asset
ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset
is charged to the Statement of Profit and Loss as an expense unless it is probable that such expenditure will enable the
intangible asset increase the future benefits from the existing asset beyond its previously assessed standard of
performance and such expenditure can be measured and attributed to the intangible asset reliably, in which case, such
expenditure is capitalised.
%XPENDITURED ON SOFTWARER DEVELOPMENT ELIGIBLE FOR CAPITALISATION ARER CARRIEDE AS
INTANGIBLE ASSETS UNDERD DEVELOPMENT where such assets are not yet ready for their intended use.
)NTANGIBLE ASSETS ARER AMORTISEDS ON AA STRAIGHT
LINE BASISS OVER THEIRE ESTIMATEDM USEFUL LIVES
!! REBUTTABLE PRESUMPTIONM that the useful life of an intangible asset will not exceed ten years from the date when
the asset is available for use is considered by the management. The amortisation period and the amortisation method
are reviewed at least at each reporting date. If the expected useful life of the asset is significantly different from previous
estimates, the amortisation period is changed accordingly.
'AINSIOR LOSSES ARISINGIFROM THEHRETIREMENT OR DISPOSAL OF AN INTANGIBLE
ASSETSARERDETERMINEDNAS THEHDIFFERENCE BETWEEN the net disposal proceeds and the carrying
amount of the asset and recognised as income or expense in the Statement of Profit and Loss in the year of disposal.
The estimated useful lives of intangible assets used for amortisation are:

Asset Estimated useful life

Computer software licenses 5 years


Electronic trading platform (Website) 5 years
Bombay Stock Exchange card 10 years

HDB Financial Services Limited


Fixed assets are stated at cost less accumulated depreciation and impairment, if any. The cost of fixed assets comprise
purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent
expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from /
of such assets.
Depreciation is charged over the estimated useful life of the fixed assets on a straight line basis in the manner prescribed in
Schedule II of the Companies Act, 2013, except for assets as under:

Asset Estimated useful life Estimated useful life


as assessed by the under Schedule II of
Company Companies Act, 2013
Motor cars 5 years 8 years

)MPROVEMENTS TO LEASEAHOLD PREMISES ARERCHARGEDROFFFOVER THEHPRIMARYYPERIODOOF


LEASEAOR ITSTUSEFUL LIFE
WHICHEVER IS lower.
ss)TEMSECOSTINGTLESS THAN ` 5,000 are fully depreciated in the year of purchase.
ss4HEH#OMPANYYHASAESTIMATEDM.ILIRESIDUAL VALUE AT THEHENDNOF THEEUSEFUL LIFEEFOR ALLLBLOCKKOF ASSETS
ss &ORRASSETS PURCHASEDHANDNSOLD DURINGNTHEHYEAR
DEPRECIATION ISSBEINGIPROVIDEDDON PRO
RATATBASISSBY THEH#OMPANY
Software and system development expenditure are capitalised at cost of acquisition including cost attributable to bring the
same in working condition and the useful life of the same is estimated of 3 years with zero residual value. Any expenses on
such software for support and maintenance payable annually are charged to the Statement of Profit and Loss.

HDFC Bank Limited Annual Report 2016-17 166


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Impairment of assets
Group
The Group assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment
loss, if any, is provided in the Statement of Profit and Loss to the extent the carrying amount of assets exceeds their
estimated recoverable amount.
Transactions involving foreign exchange
HDFC Bank Limited
Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on
the date of the transaction. Income and expenditure items of integral foreign operations (representative offices) are
translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly
average closing rates.
Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates
notified by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net
valuation profit or loss arising due to a net open position in any foreign currency is recognised in the Statement of Profit and
Loss.
Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing
exchange rates notified by FEDAI at the Balance Sheet date and the resulting profit / loss arising from exchange differences are
accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment in the non-integral
foreign operations in accordance with AS - 11, The Effects of Changes in Foreign Exchange Rates.
Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued at the
closing spot and forward rates respectively as notified by FEDAI and at interpolated rates for contracts of interim maturities. The
USD-INR rate for valuation of contracts having longer maturities i.e. greater than one year is implied from MIFOR and LIBOR
curves. For other currency pairs, the forward points (for rates / tenors not published by FEDAI) are obtained from Reuters for
valuation of the FX deals. As directed by FEDAI to consider P&L on present value basis, the forward profit or loss on the deals are
discounted till the valuation date using the discounting yields. The resulting profit or loss on valuation is recognised in the Statement
of Profit and Loss. Foreign exchange contracts are classified as assets when the fair value is positive (positive marked to market
value) or as liabilities when the fair value is negative (negative marked to market value).

Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting
currency required or available at the settlement date of a transaction and are outstanding at the Balance Sheet date, are
effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract
is amortised as expense or income over the life of the contract.
Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the
respective future contracts on that day. While the daily settlement price is computed on the basis of the last half an hour
weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day
of the future contract or as may be specified by the relevant authority from time to time. All open positions are marked to
market based on the settlement price and the resultant marked to market profit / loss is daily settled with the exchange.
Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit,
acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.
Derivative contracts HDFC
Bank Limited

The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the
derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates.
Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the
fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated
as hedges are recognised in the Statement of Profit and Loss.

HDFC Bank Limited Annual Report 2016-17 167


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market.
In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement of
Profit and Loss in the relevant period. The Bank identifies the hedged item (asset or liability) at the inception of the
transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter.
Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Profit and Loss.
Contingent liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of
exchange notified by FEDAI as at the Balance Sheet date.
Revenue recognition HDFC
Bank Limited
)NTEREST INCOME IS RECOGNISED IN THEH3TATEMENTEOF 0ROlTOANDN,OSSSON AN ACCRUALABASIS
EXCEPTEIN THEHCASE OF NON
PERFORMING assets and loan accounts where restructuring has been approved by the RBI under Strategic Debt Restructuring (SDR)
scheme where it is recognised upon realisation as per RBI norms.

)NTEREST INCOMETON INVESTMENTS IN 04#S0AND#LOANSABOUGHT OUT THROUGH THE


DIRECTHASSIGNMENT ROUTEUIS RECOGNISEDRAT THEIR effective interest rate.
)NCOME ON NON
COUPON BEARINGNDISCOUNTED INSTRUMENTS IS RECOGNISED OVER THEHTENORNOF
THEHINSTRUMENTEON AACONSTANT effective yield basis.
,OAN PROCESSING FEE IS RECOGNISED AS INCOME WHEN DUE
3YNDICATION ᄂᄂ!RRANGERGFEE IS RECOGNISED AS INCOME WHEN AA significant act / milestone is completed.
'AIN ᄂ LOSS ᄂ ON SELLSDOWN OF LOANS IS RECOGNISEDIIN LINEEWITH THEHEXTANTA2")TGUIDELINES
$IVIDEND ON EQUITY SHARES
PREFERENCE SHARES ANDNON MUTUALUFUND UNITSIIS RECOGNISED AS INCOME WHEN THEHRIGHT TO
RECEIVEE the dividend is established.
'UARANTEET COMMISSION
S COMMISSION ON LETTER OF CREDIT
D ANNUALA LOCKER RENT FEESE ANDN ANNUALA FEESE FOR CREDIT CARDSR ARER recognised on a straight-line
basis over the period of contract. Other fees and commission income are recognised when due, where the Bank is
reasonably certain of ultimate collection.
HDFC Securities Limited
ss )NCOME FROMESERVICESCRENDERED ASNADBROKERAGEGIS RECOGNISEDEUPON RENDERINGNOF THE SERVICES
ss #OMMISSIONSSAREIRECORDED ONRAETRADEDDATE BASIS AS THEASECURITIESETRANSACTIONCOCCURS
&EESEFOR SUBSCRIPTION BASEDSSERVICESCARERRECEIVED PERIODICALLYYBUT ARERRECOGNISED AS
EARNEDEON AAPRO
RATATBASISSOVER THEH term of the contract.
ss#OMMISSIONSSFROM DISTRIBUTIONIOF lNANCIAL PRODUCTS ARERRECOGNISED UPON ALLOTMENTTOF
THEHSECURITIESITO THEHAPPLICANTIOR AS the case may be, issue of the insurance policy to the applicant.
ss#OMMISSIONSSANDNFEESERECOGNISED AS AFORESAIDSAREREXCLUSIVEEOF SERVICE TAX
SECURITIESITRANSACTIONCTAX
STAMPADUTIES ANDN other levies by SEBI and stock exchanges.
ss)NTEREST ISEEARNEDEON DELAYED PAYMENTS FROMSCLIENTSOAND AMOUNTS FUNDEDUTO THEMDAS WELLLAS TERMMDEPOSITS WITHIBANKS
ss)NTEREST INCOME IS RECOGNISED ON AATIME PROPORTION BASISSTAKING INTO ACCOUNTOTHEHAMOUNT
OUTSTANDINGAFROM CUSTOMERSOOR on the financial instrument and the rate applicable.
ss$IVIDEND INCOMEDIS RECOGNISEDEWHEN THE RIGHT TOTRECEIVEETHETDIVIDENDDIS ESTABLISHED
HDB Financial Services Limited
)NTEREST INCOME IS RECOGNISED IN THEH3TATEMENTEOF 0ROlTOANDN,OSSSON AN ACCRUALABASIS
)N CASE OF .ONO0ERFORMING !SSETS
(NPA) interest income is recognised upon realisation as per the RBI Guidelines. Interest accrued and not realised
before the classification of the asset as an NPA is reversed and credited to the interest suspense account.
)NCOME FROM "0/0SERVICESCANDNOTHERHlNANCIAL CHARGESRARERRECOGNISEDSON AN ACCRUALABASIS
EXCEPTEIN CASE OF CHEQUE bouncing charges, late payment charges, foreclosure charges and application money,
which are accounted as and when received.

HDFC Bank Limited Annual Report 2016-17 168


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
ss 5PFRONTR ᄂ OPROCESSING FEESEARE RECOVERED AND RECOGNISEDRAT THE TIMEIOF DISBURSEMENT OFELOAN
ss )NCOME FROMEDIVIDEND IS RECOGNISED INNTHE 3TATEMENTEOF 0ROlT ANDN,OSS WHENSTHE RIGHT TOTRECEIVEEIS ESTABLISHED
HDB Employees Welfare Trust
ss )NCOMECIS RECOGNISED ON ACCRUALABASIS
Employee benefits
HDFC Bank Limited
Employee Stock Option Scheme (‘ESOS’)
The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank to
its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees
within a specified period.
The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation
cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined
under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on
the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period.
Gratuity:
The Bank provides for gratuity to all employees. The benefit vests upon completion of five years of service and is in the form
of lump sum payment to employees on resignation, retirement, death while in employment or on termination of employment
of an amount equivalent to 15 days basic salary payable for each completed year of service. The Bank makes contributions
to funds administered by trustees and managed by insurance companies for amounts notified by the said insurance
companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a fund set up by
eLKB and administered by the Board of Trustees.
The defined gratuity benefit plans are valued by an independent actuary as at the Balance Sheet date using the projected
unit credit method as per the requirement of AS-15, Employee Benefits, to determine the present value of the defined benefit
obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which
include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is
recognised in the Statement of Profit and Loss.
Superannuation:
Employees of the Bank, above a prescribed grade, are entitled to receive retirement benefits under the Bank’s Superannuation
Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the whole time
directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance companies, which administer the
fund. The Bank has no liability for future superannuation fund benefits other than its contribution, and recognises such contributions
as an expense in the year incurred, as such contribution is in the nature of defined contribution.
Provident fund:
In accordance with law, all employees of the Bank are entitled to receive benefits under the provident fund. The Bank
contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the
Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 15,000/- per
month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount
is contributed to a fund set up by the Bank and administered by a Board of Trustees. In respect of eCBoP employees,
employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered by RPFC and from
April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the Board of Trustees. In
respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a Board of Trustees. The
Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of the
trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees
Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Bank.
The guidance note on implementing AS-15, Employee Benefits, states that benefits involving employer established provident funds,
which require interest shortfalls to be provided, are to be considered as defined benefit plans. Actuarial valuation of this

HDFC Bank Limited Annual Report 2016-17 169


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Provident Fund interest shortfall is done as per the guidance note issued in this respect by The Institute of Actuaries of India
(IAI) and provision towards this liability is made.
The overseas branches of the Bank make contribution to the respective relevant government scheme calculated as a
percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are expensed when
due, as such contribution is in the nature of defined contribution.
Leave encashment / Compensated absences:
The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees under
Indian Banks’ Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based on an
independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early
retirement, salary increases, interest rates and leave utilisation.
Pension:
In respect of pension payable to certain eLKB employees under IBA structure, which is a defined benefit scheme, the Bank
contributes 10% of basic salary to a pension fund set up by the Bank and administered by the Board of Trustees and the balance
amount is provided based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary.
In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and had
completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will be
converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands
frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for.
In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years,
pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision
thereto is made based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary.
HDFC Securities Limited
Short term
Short term employee benefits include salaries and performance incentives. A liability is recognised for the amount expected
to be paid under short term cash bonus or profit sharing plans if the Company has a present legal or informal obligation to
pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. These
costs are recognised as an expense in the Statement of Profit and Loss at the undiscounted amount expected to be paid
over the period of services rendered by the employees to the Company.
Long term
The Company offers its employees long term benefits by way of defined-contribution and defined-benefit plans, of which
some have assets in special funds or securities. The plans are financed by the Company and in the case of some defined
contribution plans by the Company along with its employees.
Defined-contribution plans
These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal
obligation to pay additional sums. These comprise of contributions to the National Pension Scheme, Employees’ Provident
Fund, Family Pension Fund and Superannuation Fund. The Company’s payments to the defined-contribution plans are
reported as expenses during the period in which the employees perform the services that the payment covers.
Defined-benefit plans
Expenses for defined-benefit gratuity plan are calculated as at the Balance Sheet date by an independent actuary in a
manner that distributes expenses over the employee’s working life. These commitments are valued at the present value of
the expected future payments, with consideration for calculated future salary increases, using a discount rate corresponding
to the interest rate estimated by the actuary having regard to the interest rate on government bonds with a remaining term
that is almost equivalent to the average balance working period of employees. The fair values of the plan assets are
deducted in determining the net liability. When the fair value of plan assets exceeds the commitments computed as
aforesaid, the recognised asset is limited to the net total of any cumulative past service costs and the present value of any
economic benefits available in the form of reductions in future contributions to the plan.
Actuarial losses or gains are recognised in the Statement of Profit and Loss in the year in which they arise.

HDFC Bank Limited Annual Report 2016-17 170


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Other employee benefits
Compensated absences which accrue to employees and which can be carried to future periods but are expected to be
availed in twelve months immediately following the year in which the employee has rendered service are reported as
expenses during the year in which the employees perform the services that the benefit covers and the liabilities are reported
at the undiscounted amount of the benefits.
Where there are restrictions on availment of such accrued benefit or where the availment is otherwise not expected to wholly
occur in the next twelve months, the liability on account of the benefit is actuarially determined using the projected unit credit
method.
Share-based payment transactions
Equity settled stock options granted under the Company’s Employee Stock Option Schemes are accounted for as per the
accounting treatment prescribed by the Guidance Note on Employee Share-based Payments issued by the Institute of
Chartered Accountants of India. The intrinsic value of the option being excess of fair value of the underlying share
immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to
employee stock option outstanding account. The deferred employee compensation is charged to Statement of Profit and
Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee
compensation expense, equal to the amortised portion of value of lapsed portion and credit to deferred employee
compensation expense equal to the unamortised portion.
HDB Financial Services Limited
Long term employee benefits
Gratuity
The Company provides for gratuity to all employees. The benefit is in the form of lump sum payments to vested employees
on resignation, retirement, or death while in employment or on termination of employment of an amount equivalent to 15
days basic salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The
Company makes annual contributions to fund administered by trustees and managed by insurance companies for amounts
notified by the said insurance companies. The defined benefit plan are valued by an independent external actuary as at the
Balance Sheet date using the projected unit credit method to determine the present value of defined benefit obligation and
the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions
about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the
Statement of Profit and Loss.
Provident fund
In accordance with the applicable law, all employees of the Company are entitled to receive benefits under the Provident Fund Act,
1952. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary) to
the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for
future provident fund benefits other than its annual contribution. Since it is a defined contribution plan, the contributions are
accounted for on an accrual basis and recognised in the Statement of Profit and Loss.
Compensated absences
The Company does not have a policy of encashment of unavailed leaves for its employees but are permitted to carry forward
subject to a prescribed maximum days. The Company provides for compensated absences in accordance with AS 15
(revised 2005) Employee Benefits issued by Institute of Chartered Accountants of India. The provision is based on an
independent external actuarial valuation at the balance sheet date.
Debit and credit cards reward points
HDFC Bank Limited
The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial
method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends.
Provisions for liabilities on the outstanding reward points are made based on the actuarial valuation report as furnished by
the said independent actuary and included in other liabilities.

HDFC Bank Limited Annual Report 2016-17 171


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Bullion
HDFC Bank Limited
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail customers. The
imports are typically on a back-to-back basis and are priced to the customer based on an estimated price quoted by the supplier.
The Bank earns a fee on such wholesale bullion transactions. The fee is classified under commission income.

The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classified as
interest expense / income respectively.
Lease accounting
Group
Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Profit and
Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases.
Income tax
Group
Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the
Income Tax Act, 1961, the rules framed there under and considering the material principles set out in Income Computation
and Disclosure Standards) and the net change in the deferred tax asset or liability during the year. Deferred tax assets and
liabilities are recognised for the future tax consequences of timing differences between the carrying values of assets and
liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred tax assets and liabilities are
measured using the enacted or substantively enacted tax rates as at the Balance Sheet date.
Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by
the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future.
In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if
there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and
appropriately adjusted to reflect the amount that is reasonably / virtually certain to be realised.
Earnings per share
Group
The Group reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic
earnings per equity share has been computed by dividing net profit for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution
that could occur if securities or other contracts to issue equity shares were exercised or converted to equity during the year.
Diluted earnings per equity share are computed using the weighted average number of equity shares and the dilutive
potential equity shares outstanding during the period except where the results are anti-dilutive.
Share issue expenses HDFC

Bank Limited

Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.
Segment information

Group

The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued
by RBI.

HDFC Bank Limited Annual Report 2016-17 172


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Accounting for provisions, contingent liabilities and contingent assets

Group

In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Group recognises provisions when it
has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date,
supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to reflect
the current management estimates.

A disclosure of contingent liability is made when there is:

AA POSSIBLE OBLIGATION ARISINGI FROM AA PAST EVENT


THEH EXISTENCEE OF WHICHI WILL BE CONlRMEDE BY THEH OCCURRENCE OR non-occurrence of one or more uncertain
future events not within the control of the Group; or

AAPRESENTSOBLIGATION ARISINGIFROM AAPAST EVENTNWHICHIIS NOTORECOGNISEDNAS IT IS NOTOPROBABLE THAT AN


OUTmOWWOF RESOURCESU will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.

Contingent assets, if any, are not recognised in the financial statements since this may result in the recognition of income
that may never be realised.
Onerous contracts
Provisions for onerous contracts are recognised when the expected benefits to be derived by the Bank from a contract are lower
than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of
the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a
provision is established, the Bank recognises any impairment loss on the assets associated with that contract.

Cash and cash equivalents

Group

Cash and cash equivalents include cash and gold in hand, balances with RBI, balances with other banks and money at call
and short notice.
Corporate social responsibility

Group

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, are recognised in the
Statement of Profit and Loss.

HDFC Bank Limited Annual Report 2016-17 173


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
SCHEDULE 18 - Notes forming part of the consolidated financial statements for the year ended March 31, 2017
Amounts in notes forming part of the consolidated financial statements for the year ended March 31, 2017 are denominated in
rupee crore to conform to extant RBI guidelines.
Amalgamation of Atlas Documentary Facilitators Company Private Limited and HBL Global Private Limited with HDB
Financial Services Limited
During the year ended March 31, 2017, Atlas Documentary Facilitators Company Private Limited and HBL Global Private
Limited, associates of the Bank as at March 31, 2016, amalgamated with HDB Financial Services Limited, pursuant to the
approval of the Honourable High courts of Gujarat and Bombay with effect from December 1, 2016. The appointed date of
the merger as per the scheme of amalgamation was April 1, 2014. Accordingly, the consolidated financial statements include
the effect of the said amalgamation. In view of the amalgamation, the figures for the current year are not comparable with the
corresponding figures of the previous year.
Change in classification
Pursuant to RBI circular dated May 19, 2016, the Bank has, included its repurchase / reverse repurchase transactions under
Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) with RBI under ‘Borrowings from RBI’ / ‘Balances
with RBI’, as the case may be. Hitherto, these transactions were netted from / included under ‘Investments’. Figures of the
previous year have been regrouped / reclassified to conform to current year’s classification. The above change in
classification has no impact on the profit of the Bank for the years ended March 31, 2017 and March 31, 2016.
Proposed dividend
The Board of Directors of the Bank, at their meeting held on April 21, 2017, have proposed a dividend of ` 11.00 per equity
share aggregating ` 3,392.71 crore, inclusive of tax on dividend. The proposal is subject to the approval of shareholders at
the Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the
Balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting
Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend from Statement of Profit and Loss for
the year ended March 31, 2017. Accordingly, the proposed dividend and the tax thereon, under Appropriations in the
Statement of Profit and Loss is lower by ` 2,818.80 crore and ` 573.91 crore respectively and the balance of Other Liabilities
is lower by an equivalent amount as at March 31, 2017. However, the effect of the proposed dividend has been reckoned in
determining consolidated capital funds in the computation of the capital adequacy ratio as at March 31, 2017.
Capital infusion
During the year ended March 31, 2017, the Bank allotted 3,43,59,200 equity shares (previous year: 2,16,91,200 equity shares)
aggregating to face value ` 6.87 crore (previous year: ` 4.34 crore) in respect of stock options exercised. Accordingly, share
capital increased by ` 6.87 crore (previous year: ` 4.34 crore) and share premium increased by ` 2,254.64 crore (previous
year: ` 1,218.56 crore).
Details of movement in the paid-up equity share capital of the Bank are given below: (` crore)

Particulars March 31, 2017 March 31, 2016


Opening balance 505.64 501.30
Addition pursuant to stock options exercised 6.87 4.34

Closing balance 512.51 505.64

Earnings per equity share


Basic and diluted earnings per equity share have been calculated based on the consolidated profit attributable to the Group
of ` 15,253.03 crore (previous year: ` 12,801.33 crore) and the weighted average number of equity shares outstanding during
the year of 2,54,43,33,609 (previous year: 2,51,74,29,120).

HDFC Bank Limited Annual Report 2016-17 174


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Following is the reconciliation between basic and diluted earnings per equity share:
Particulars For the years ended
March 31, 2017 March 31, 2016
Nominal value per share (`) 2.00 2.00
Basic earnings per share (`) 59.95 50.85
Effect of potential equity shares (per share) (`) (0.79) (0.61)
Diluted earnings per share (`) 59.16 50.24
Basic earnings per equity share has been computed by dividing net profit for the year attributable to the equity shareholders
by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share has been
computed by dividing the net profit for the year attributable to the equity shareholders by the weighted average number of
equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. The
dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of dilution on the profits
in the current year and previous year.
Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted
earnings per share:
Particulars For the years ended
March 31, 2017 March 31, 2016
Weighted average number of equity shares used in computing basic earnings 2,54,43,33,609 2,51,74,29,120
per equity share
Effect of potential equity shares outstanding 3,40,55,428 3,04,43,320
Weighted average number of equity shares used in computing diluted earnings 2,57,83,89,037 2,54,78,72,440
per equity share

Reserves and Surplus


Drawdown from reserves
Share Premium
The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2017 and March 31, 2016.
Statutory Reserve
The Group has made an appropriation of ` 3,777.16 crore (previous year: ` 3,180.93 crore) out of profits for the year ended
March 31, 2017 to Statutory Reserve pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and
RBI guidelines dated September 23, 2000.
Capital Reserve
During the year ended March 31, 2017, the Bank appropriated ` 313.41 crore (previous year: ` 222.15 crore), being the profit
from sale of investments under HTM category and profit on sale of immovable properties, net of taxes and transfer to
statutory reserve, from Profit and Loss Account to Capital Reserve Account.
General Reserve
The Group has made an appropriation of ` 1,454.96 crore (previous year: ` 1,229.62 crore) out of profits for the year ended
March 31, 2017 to General Reserve.
Investment Reserve Account
During the year ended March 31, 2017, the Bank has appropriated ` 4.29 crore (net) from Profit and Loss Account to
Investment Reserve Account as per RBI guidelines. In the previous year the Bank had transferred ` 8.52 crore (net) from
Investment Reserve Account to Profit and Loss Account as per RBI guidelines.
Dividend on shares allotted pursuant to exercise of stock options
The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise of
any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2017, if
approved at the ensuing Annual General Meeting.

HDFC Bank Limited Annual Report 2016-17 175


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Accounting for employee share based payments
HDFC Bank Limited
The shareholders of the Bank approved grant of equity share options under Plan “C” in June 2005, Plan “D” in June 2007,
Plan “E” in June 2010, Plan “F” in June 2013 and Plan “G” in July 2016. Under the terms of each of these Plans, the Bank
may issue to its employees and Whole Time Directors, Equity Stock Options (‘ESOPs’) each of which is convertible into one
equity share. All the plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock
Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of grant. Accounting for the
stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent
applicable.
Plans C, D, E, F and G provide for the issuance of options at the recommendation of the Nomination & Remuneration
Committee at the closing price on the working day immediately preceding the date when options are granted. This closing
price is the closing price of the Bank’s equity share on an Indian stock exchange with the highest trading volume as of the
working day preceding the date of grant.
Vesting conditions applicable to the options are at the discretion of the Nomination & Remuneration Committee. These
options are exercisable on vesting, for a period as set forth by the Nomination & Remuneration Committee at the time of
grant. The period in which options may be exercised cannot exceed five years. During the years ended March 31, 2017 and
March 31, 2016, no modifications were made to the terms and conditions of ESOPs as approved by the Nomination &
Remuneration Committee.
Activity in the options outstanding under the Employee Stock Options Plans
s!CTIVITY IN THEHOPTIONSIOUTSTANDINGAUNDERDTHEHVARIOUS EMPLOYEE STOCKKOPTION PLANSAAS AT -ARCHR
Particulars Number of Weighted average
Options exercise price (`)
Options outstanding, beginning of year 12,86,54,300 840.19
Granted during the year - -
Exercised during the year 3,43,59,200 658.20
Forfeited / Lapsed during the year 21,38,800 972.97
Options outstanding, end of year 9,21,56,300 904.97
Options exercisable 5,63,14,000 835.06

!CTIVITY IN THEHOPTIONSIOUTSTANDINGAUNDERDTHEHVARIOUS EMPLOYEE STOCKKOPTION PLANSAASSAT -ARCHR


Particulars Number of Weighted average
Options exercise price (`)
Options outstanding, beginning of year 10,90,33,000 683.16
Granted during the year 4,48,36,200 1,092.65
Exercised during the year 2,16,91,200 563.78
Forfeited / Lapsed during the year 35,23,700 895.09
Options outstanding, end of year 12,86,54,300 840.19
Options exercisable 4,96,81,000 661.84

&OLLOWING TABLE SUMMARISES THEHINFORMATION ABOUTOSTOCKKOPTIONS OUTSTANDINGAAS AT -ARCHR


Number of Weighted average Weighted average
Plan Range of exercise price (`) shares arising life of options exercise price
out of options (in years) (`)
Plan C 680.00 to 835.50 46,44,400 2.34 690.91
Plan D 680.00 33,34,300 2.33 680.00
Plan E 468.40 to 680.00 1,50,94,600 2.18 650.01
Plan F 835.50 to 1,097.80 6,90,83,000 3.90 985.92

HDFC Bank Limited Annual Report 2016-17 176


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
&OLLOWING TABLE SUMMARISES THEHINFORMATION ABOUTOSTOCKKOPTIONS OUTSTANDINGAAS AT -ARCHR
Number of Weighted average Weighted average
Plan Range of exercise price (`) shares arising life of options exercise price
out of options (in years) (`)
Plan C 680.00 to 835.50 57,40,800 3.34 693.00
Plan D 680.00 51,33,900 3.32 680.00
Plan E 440.16 to 680.00 3,78,50,200 2.49 598.71
Plan F 835.50 to 1,097.80 7,99,29,400 4.80 975.41

Fair value methodology


The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the
dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical share
prices. No stock options were granted during the year ended March 31, 2017 (previous year: 4,48,36,200). The various
assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2016 were:
Particulars March 31, 2016
Dividend yield 0.73%
Expected volatility 23.29% to 26.46%
Risk - free interest rate 7.71% to 8.07%
Expected life of the options 1 to 7 years

Impact of fair value method on net profit and earnings per share (‘EPS’)
Had the compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s
net profit and earnings per share would have been as per the proforma amounts indicated below: (` crore)
Particulars March 31, 2017 March 31, 2016
Net profit (as reported) 14,549.66 12,296.23
Add: Stock-based employee compensation expense included in net income - -
Less: Stock based compensation expense determined under fair value based 812.75 1,265.93
method (proforma)
Net profit (proforma) 13,736.91 11,030.30
(`) (`)
Basic earnings per share (as reported) 57.18 48.84
Basic earnings per share (proforma) 53.99 43.82
Diluted earnings per share (as reported) 56.43 48.26
Diluted earnings per share (proforma) 53.28 43.29
HDFC Securities Limited
The Shareholders of the Company approved a stock option scheme (viz. ESOS - II) in February 2017 (“Company Options”).
Under the terms of the scheme, the Company issues stock options to employees, whole time director, managing director and
directors (excluding Independent Directors) of the Company, each of which is convertible into one equity share.
Scheme ESOS - II provides for the issuance of options at the recommendation of the Compensation Committee of the Board
of Directors (the “Compensation Committee”) at a price of ` 1,136/- per share, being the fair market value of the share arrived
by considering the average price of the two independent valuation reports.
Such options vest at definitive dates, save for specific incidents, prescribed in the scheme as framed / approved by the
Compensation Committee. Such options are exercisable for a period following the vesting at the discretion of the
Compensation Committee.
Method used for accounting for shared based payment plan
The Company uses the Intrinsic Value method to account for the compensation cost of stock options to employees of the
Company.

HDFC Bank Limited Annual Report 2016-17 177


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Activity in the options outstanding under the Employee Stock Options Plan
!CTIVITY IN THEHOPTIONSIOUTSTANDINGAUNDERDTHEH%MPLOYEESE3TOCKK/PTIONSI0LAN AS AT -ARCHR
Particulars Company Weighted average
options exercise price (`)
Options outstanding, beginning of year - -
Granted during the year 2,80,000 1,136
Exercised during the year - -
Forfeited / Lapsed during the year - -
Options outstanding, end of year 2,80,000 1,136
Options exercisable - -

&OLLOWING TABLE SUMMARISES THEHINFORMATION ABOUTOSTOCKKOPTIONS OUTSTANDINGAAS AT -ARCHR


Plan Range of Number of shares Weighted average remaining Weighted average
exercise price (`) arising out of options contractual life of options (in years) exercise price (`)
Company Options 1,136 2,80,000 4.1 years 1,136
There were no stock options outstanding as at March 31, 2016.
Fair value methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated on dates
of each grant using the Black and Scholes model. The shares of the Company are not listed on any stock exchange.
Accordingly, the Company has considered the volatility of the Company’s stock price as an average of the historical volatility
of similar listed enterprises for the purpose of calculating the fair value to reduce any company specific variations. The
various assumptions considered in the pricing model for the stock options granted by the Company during the year ended
March 31, 2017 are:
Particulars March 31, 2017 March 31, 2016
Dividend yield 3.52% -
Expected volatility 43.53% to 42.48% -
Risk - free interest rate 6.60% to 6.90% -
Expected life of the options 3 to 5 years -

Impact of fair value method on net profit and EPS


Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the
Company’s net profit and earnings per share would have been as per the proforma amounts indicated below:
(` crore)
Particulars March 31, 2017 March 31, 2016
Net Profit (as reported) 215.90 133.34
Add: Stock-based employee compensation expense included in net income - -
Less: Stock-based compensation expense determined under fair value based 0.78 -
method (proforma)
Net Profit (proforma) 215.12 133.34
(`) (`)
Basic earnings per share (as reported) 139.45 86.12
Basic earnings per share (proforma) 138.95 86.12
Diluted earnings per share (as reported) 139.45 86.12
Diluted earnings per share (proforma) 138.95 86.12

HDFC Bank Limited Annual Report 2016-17 178


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
HDB Financial Services Limited
In accordance with resolution approved by the shareholders, the Company has reserved shares, for issue to employees
through ESOP Scheme. On the approval of Nomination and Remuneration Committee (NRC), each ESOP scheme is issued.
The NRC has approved stock option schemes ESOS-5 on July 27, 2011, ESOS-6 on June 11, 2012, ESOS-7 on July 19,
2013, ESOS-8 on July 14, 2015 and ESOS-9 on October 18, 2016. Under the term of the schemes, the Company may issue
stock options to employees and directors of the Company, each of which is convertible into one equity share.
Such options vest at a definitive date, save for specific incidents, prescribed in the scheme as framed / approved by the
NRC. Such options are exercisable for a period following vesting at the discretion of the NRC, subject to a maximum of two
years from the date of vesting for ESOS-5, ESOS-6, ESOS-7 and ESOS-8 and maximum of four years from the date of
vesting for ESOS-9.
Method used for accounting for shared based payment plan
The Company uses intrinsic value to account for the compensation cost of stock options to employees of the Company.
Activity in the options outstanding under the Employee Stock Option Plans
!CTIVITY IN THEHOPTIONSIOUTSTANDINGAUNDERDTHEH%MPLOYEE 3TOCK /PTION 0LAN AS AT -ARCHR
Particulars Options Weighted average
exercise price (`)
Options outstanding, beginning of year 48,42,950 88.41
Granted during the year 31,17,500 137.00
Exercised during the year 15,79,440 77.86
Forfeited / Lapsed during the year 5,02,350 93.46
Options outstanding, end of year 58,78,660 112.46
ss !CTIVITY IN THEHOPTIONSIOUTSTANDINGAUNDERDTHEH%MPLOYEE 3TOCKK/PTION 0LAN AS AT -ARCHR

Particulars Options Weighted average


exercise price (`)
Options outstanding, beginning of year 14,37,250 50.62
Granted during the year 44,13,000 88.00
Exercised during the year 7,02,550 48.25
Forfeited / Lapsed during the year 3,04,750 76.22
Options outstanding, end of year 48,42,950 88.41
ss &OLLOWING TABLE SUMMARISES THEHINFORMATION ABOUTOSTOCKKOPTIONSSOUTSTANDINGAAS AT -ARCHR
Range of Number of shares Weighted average Weighted average
Plan exercise price arising out remaining contractual life exercise
(`) of options of options (in years) price (`)
ESOS - 6 31.00 1,200 0.50 31.00
ESOS - 7 56.00 1,02,700 0.50 56.00
ESOS - 8 88.00 27,71,260 2.74 88.00
ESOS - 9 137.00 30,03,500 5.49 137.00
ss
&OLLOWING TABLE SUMMARISES THEHINFORMATION ABOUTOSTOCKKOPTIONSSOUTSTANDINGAAS AT -ARCHR

Range of Number of shares Weighted average Weighted average


Plan exercise price arising out remaining contractual life exercise
(`) of options of options (in years) price (`)
ESOS - 5 25.00 4,000 0.50 25.00
ESOS - 6 31.00 70,650 1.30 31.00
ESOS - 7 56.00 5,60,300 1.35 56.00
ESOS - 8 88.00 42,08,000 1.40 88.00
HDFC Bank Limited Annual Report 2016-17 179
Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Fair Value methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated on the
dates of each grant using the Black-Scholes model. The shares of Company are not listed on any stock exchange.
Accordingly, the Company has considered the volatility of the Company’s stock price as zero, since historical volatility of
similar listed enterprise was not available. The various assumptions considered in the pricing model for the stock options
granted by the Company during the year ended March 31, 2017 are:
Particulars March 31, 2017 March 31, 2016
Dividend yield 0.88% 0.80%
Expected volatility Nil Nil
Risk-free interest rate 6.54% 7.70%
Expected life of the option 3 years 2.21 years

Impact of fair value method on net profit and EPS


Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the
Company’s net profit and earnings per share would have been as per the proforma amounts indicated below:
(` crore)
Particulars March 31, 2017 March 31, 2016
Net Profit (as reported) 684.21 534.41
Add: Stock-based employee compensation expense included in net income - -
Less: Stock-based compensation expense determined under fair value based 8.36 4.87
method (proforma)
Net Profit (proforma) 675.85 529.54
(`) (`)
Basic earnings per share (as reported) 9.64 7.64
Basic earnings per share (proforma) 9.52 7.57
Diluted earnings per share (as reported) 9.64 7.64
Diluted earnings per share (proforma) 9.52 7.57

Group
Impact of fair value method on net profit and EPS of the Group
Had compensation cost for the stock option plans outstanding been determined based on the fair value approach, the Group’s
net profit and earnings per share would have been as per the proforma amounts indicated below: (` crore)
Particulars March 31, 2017 March 31, 2016
Net Profit (as reported) 15,253.03 12,801.33
Less: Stock-based compensation expense determined under fair value based 821.89 1,270.80
method (proforma)
Net Profit (proforma) 14,431.14 11,530.53
(`) (`)
Basic earnings per share (as reported) 59.95 50.85
Basic earnings per share (proforma) 56.72 45.80
Diluted earnings per share (as reported) 59.16 50.24
Diluted earnings per share (proforma) 55.97 45.26

HDFC Bank Limited Annual Report 2016-17 180


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Other liabilities
4HEH"ANK HASAPRESENTEDEGROSS UNREALISED GAIN ON FOREIGN
EXCHANGEGANDNDERIVATIVEECONTRACTS UNDERDOTHERHASSETS ANDN gross unrealised loss on foreign
exchange and derivative contracts under other liabilities. Accordingly, other liabilities as at March 31, 2017 include
unrealised loss on foreign exchange and derivative contracts of ` 13,880.38 crore (previous year: ` 7,524.88 crore)
Investments
)NVESTMENTS INCLUDELSECURITIESIOF &ACEC6ALUE &6 AGGREGATING ` 1,520.00 crore (previous year: FV ` 1,520.00 crore)
which are kept as margin for clearing of securities, of FV ` 24,488.31 crore (previous year: FV ` 13,729.30 crore) which
are kept as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 100.00 crore
(previous year: FV ` 56.00 crore) which are kept as margin for Forex Forward segment - Default Fund with the Clearing
Corporation of India Limited (CCIL).
)NVESTMENTS INCLUDELSECURITIESIOF &6 AGGREGATING ` 16.00 crore (previous year: FV ` 16.00 crore) which are
kept as margin with National Securities Clearing Corporation of India Limited. (NSCCIL), of FV aggregating ` 13.00
crore (previous year: FV ` 13.00 crore) which are kept as margin with Metropolitan Clearing Corporation of India Limited
and of FV aggregating ` 5.00 crore (previous year: ` 1.00 crore) which are kept as margin with Indian Clearing
Corporation Limited in the BSE currency derivatives segment.
)NVESTMENTS HAVING &6 AGGREGATING ` 42,730.27 crore (previous year: FV ` 35,937.22 crore) are kept as margin
towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 41,473.92 crore (previous year: `
13,091.46 crore) are kept as margin towards repo transactions with the RBI.
)NVESTMENTS OF &6 AGGREGATING ` 11.05 crore (previous year: FV ` 10.05 crore) are kept as margin for Forex Settlement
Default Fund, of FV aggregating ` 75.40 crore (previous year: ` 85.40 crore) are kept as Cash Margin, of FV aggregating
` 65.00 crore (previous year: nil) are kept as margin for Securities Segment Default Fund, of FV aggregating ` 25.00 crore
(previous year: nil) are kept as margin for CBLO Segment Default Fund and of FV aggregating ` 41.00 crore (previous
year: ` 11.00 crore) are kept as margin for Rupee Derivatives Guaranteed Settlement Default Fund with CCIL.
11 Other fixed assets
Other fixed assets includes amount capitalised relating to software, Bombay Stock Exchange card and electronic trading
platform. Summary regarding the same is tabulated below: (` crore)

Particulars March 31, 2017 March 31, 2016


Cost
As at March 31 of the previous year 1,774.82 1,609.52

Additions during the year 413.26 165.31

Deductions during the year - (0.01)

Total (a) 2,188.08 1,774.82

Depreciation

As at March 31 of the previous year 1,248.71 1,049.45

Charge for the year 260.41 199.27

On deductions during the year - (0.01)

Total (b) 1,509.12 1,248.71

Net value (a-b) 678.96 526.11

HDFC Bank Limited Annual Report 2016-17 181


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Other assets

/THERHASSETS INCLUDELDEFERREDRTAXAASSETSNET EOF ` 2,587.06 crore (previous year: ` 2,227.23 crore). The
break-up of the same is as follows:
(` crore)
Particulars March 31, 2017 March 31, 2016
Deferred tax asset arising out of:
Loan loss provisions 2,207.53 1,856.51
Employee benefits 175.39 150.77
Others 322.66 314.47
Total (a) 2,705.58 2,321.75
Deferred tax liability arising out of:
Depreciation (118.52) (94.52)
Total (b) (118.52) (94.52)
Deferred tax asset (net) (a-b) 2,587.06 2,227.23

Provisions, contingent liabilities and contingent assets

Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the
Bank.

a)Provision for credit card and debit card reward points (` crore)

Particulars March 31, 2017 March 31, 2016


Opening provision for reward points 306.36 200.07
Provision for reward points made during the year 334.24 179.50
Utilisation / write back of provision for reward points (209.36) (73.21)
Closing provision for reward points 431.24 306.36

b)Provision for legal and other contingencies (` crore)

Particulars March 31, 2017 March 31, 2016


Opening provision 344.56 354.91
Movement during the year (net) (32.66) (10.35)
Closing provision 311.90 344.56

c)Provision pertaining to fraud accounts

Particulars March 31, 2017


No. of frauds reported during the year 2,319
Amount involved in fraud (` crore) 165.20
Amount involved in fraud net of recoveries / write-offs as at the end of the year (` crore) 20.83
Provisions held as at the end of the year (` crore) 20.83
Amount of unamortised provision debited from “other reserves” as at the end of the year -
(` crore)

HDFC Bank Limited Annual Report 2016-17 182


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
Description of contingent liabilities
Sr. Contingent liability* Brief description
No.
1 Claims against the Group The Group is a party to various taxation matters in respect of which appeals are pending.
not acknowledged as The Group expects the outcome of the appeals to be favourable based on decisions on similar
debts - taxation issues in the previous years by the appellate authorities, based on the facts of the case and
the provisions of Income Tax Act, 1961.
2 Claims against the Group The Group is a party to various legal proceedings in the normal course of business.
not acknowledged as The Group does not expect the outcome of these proceedings to have a material adverse
debts - others effect on the Group’s financial conditions, results of operations or cash flows.
3 Liability on account of The Bank enters into foreign exchange contracts, currency options, forward rate
forward exchange and agreements, currency swaps and interest rate swaps with inter-bank participants on
derivative contracts its own account and for customers. Forward exchange contracts are commitments to
buy or sell foreign currency at a future date at the contracted rate. Currency swaps
are commitments to exchange cash flows by way of interest / principal in one currency
against another, based on predetermined rates. Interest rate swaps are commitments to
exchange fixed and floating interest rate cash flows. The notional amounts of financial
instruments such as foreign exchange contracts and derivatives provide a basis for
comparison with instruments recognised on the Balance Sheet but do not necessarily
indicate the amounts of future cash flows involved or the current fair value of the
instruments and therefore, do not indicate the Bank’s exposure to credit or price risks.
The derivative instruments become favorable (assets) or unfavorable (liabilities) as a
result of fluctuations in market rates or prices relative to their terms.
4 Guarantees given on As a part of its commercial banking activities the Bank issues documentary credit and
behalf of constituents, guarantees on behalf of its customers. Documentary credits such as letters of credit
acceptances, enhance the credit standing of the Bank’s customers. Guarantees generally represent
endorsements and other irrevocable assurances that the Bank will make payments in the event of the customer
obligations failing to fulfill its financial or performance obligations.
5 Other items for which These include: a) Credit enhancements in respect of securitised-out loans; b) Bills
the Group is contingently rediscounted by the Bank; c) Capital commitments; d) Underwriting commitments;
liable e) Investment purchases pending settlement; f) Amount transferred to the RBI under the
Depositor Education and Awareness Fund (DEAF).

*Also refer Schedule 12 - Contingent Liabilities


Commission, exchange and brokerage income
Commission, exchange and brokerage income is net of correspondent bank charges.
Provisions and contingencies
The break-up of ‘Provisions and Contingencies’ included in the Statement of Profit and Loss is given below: (` crore)
Particulars March 31, 2017 March 31, 2016
Provision for income tax - Current 8,424.16 6,889.36
- Deferred (346.04) (195.70)
Provision for NPAs 3,503.37 2,344.37
Provision for diminution in value of non-performing investments (7.64) 14.65
Provision for standard assets 431.23 464.89
Other provisions and contingencies* 63.85 136.86
Total 12,068.93 9,654.43

*Includes provisions for tax, legal and other contingencies ` 38.72 crore (previous year: ` 37.33 crore), floating provisions
25.00 crore (previous year: ` 115.00 crore), provisions / (write back) for securitised-out assets ` 2.62 crore (previous year:
(2.85) crore) and standard restructured assets ` (2.50) crore (previous year: ` (12.62) crore).

HDFC Bank Limited Annual Report 2016-17 183


Schedules to the Consolidated Financial Statements
For the year ended March 31, 2017
16 Employee benefits
Gratuity (` crore)

Particulars March 31, 2017 March 31, 2016


Reconciliation of opening and closing balance of the present value of the
defined benefit obligation
Present value of obligation as at April 1 401.93 318.37
Addition due to amalgamation